AUDIT DEAD IN A DECADE?
By Ranica Arrowsn
Published
October 31 2018, 12:49pm EDT
Accounting professor David Yermack thinks the audit profession may be dead in 10 years.
Ata roundtable discussion held at New York University on Oct. 30, Yermack, who is a legal,
economies and finance expert and the Albert Fingerhut Professor of Finance and Business
Transformation at NYU's Stem School of Business, based his observation on the role that
artificial intelligence and blockchain are taking in audit.
he distributed ledger reduces the need for audit by 97 percent,” he said. “Auditors in the future
will be competing on the basis of productivity, which will essentially mean who has the fastest
hardware and software, And fraud, in the classical sense, will be all but impossible.”
The concept of the immutability of a set of data has been fundamental to the development of
blockchain technology, according to Abhishek Biswas, corporate vice president and director at
New York Life, who was also on the panel. And that is why fraud the way we know it today will
effectively disappear with the rise of the distributed ledger.
But while blockchains are extremely secure by design, there are other opportunities for fraud that
will develop alongside the technology, as they have alongside every technology we have seen
thus far. For instance, socially engineered hacks, like phishing, in which cybercriminals target
people (rather than computers of software) with emails and personal messages, may still be an
effective way to gain access to private information even as blockchain becomes more
widespread.
Yermack is not alone in his gloomy view of the future of the audit profession, although he may
be one of the few to state the sentiment so boldly. The American Institute of CPAs is very aware
of how Al is changing the sampling process drastically already, and recently launched_an
initiative to build what it’s calling a “Dynamic Audit Solution” that it hopes will drastically
change the methodology of audits. At its recent user conference, Sage Intact shared a similar
plan: The company wants to build software that shifts audit from “after the fact” to “real time
and continuous.”
Ryan Lazat a CPA and CA who was also at the NYU discussion, didn’t quite share Yermack’s
view that audit will die, but does think the role of the auditor will change — perhaps drastically -
~ but that it will remain an important part of accounting services.
‘An auditor's job has two parts,” said Lazanis, who is the founder of a paperless firm, Xen
Accounting. “First, to provide independent verification of third-party data, but also to applyaccounting standards, and use judgment to verify that the record is valid and accurate. The audit
role will shift more to the second part than the first.”
He went on to say that blockchain, as it develops, will be an “interesting tool” for auditors, as it
provides the ultimate audit trail.” Expertise in blockchain will be highly sought after by firms in
the future, he added.
But when will this shift occur? First, more data needs to flow through blockchains, Lazanis said;
big players, like the Big Four, major corporations, big banks and governments need to adopt the
technology; and regulations need to become clearer. But Lazanis thinks we could be as near as,
five years away from this shift taking place.
Ranica Arrowsmith
Ranica Arrowsmith is technology editor for Accounting ‘Today.