Thanks to members for the interest they have shown in our Vocational Committee’s Programme.

In today’s article, President Doug McLean takes us across the seas and into the mysteries of finance.

I started my career in 1978 as an Audit Junior with Price Waterhouse in Edmonton Canada.

In this era the audit and tax functions comprised about 80% of PwC’s business and 20% was consulting, I suspect a lot of partners at the firm today wish they could return to this business model.

Many of my smaller and even medium sized clients still had accounting systems based on ledgers and card systems like Kalamazoo, and the large clients like Esso Canada had computer systems that took up whole floors of office towers.

Annual audits for clients were done by a team in the field with large boxes of files which were locked up at night and at the end of the field work our files went back to the office for review by the Managers and Partners.

At this time auditors and their larger clients had a very constructive working relationship and consulted closely to overcome any perceived reporting issues before the annual accounts were signed off.  It was also a time when public companies annual reports were much smaller and easier to read.

Over time the audit function appears to have taken a back seat to the consulting and special tax advice areas at the big accounting firms.  In many ways the audit team were encouraged to look for consulting projects at clients to increase the scope of work undertaken by the firm.

Another major shift in the professional accounting profession has been the number of women entering the profession and moving into senior roles.  This trend was starting in the early 1980’s but it was difficult for female managers to make it to the partner level until the early 2000’s.  Today from my understanding the annual intake of graduates is at least 50/50 and more women are getting to a higher level as partners.

The introduction of laptop computers enabled the audit teams to move most of their work from paper files but also create special software programs to undertake audit testing on clients accounting records.

Offsetting this efficiency gain is the requirement for companies to provide a much higher level of financial information to shareholders.  The net result is less, lower-level audit roles and more higher-level technical roles within firms.

Artificial intelligence will be another area which should have a significant impact on financial reporting and the audit function.  The time required to prepare the company’s annual report should be dramatically reduced as well as the audit review and compliance function.  

AI should also assist in identifying key audit risk at clients and develop the testing to ensure internal controls are operating within companies accounting systems.

One risk is AI could be manipulated by unscrupulous parties within or even external to the company for a financial advantage. 

One of the key lessons I learnt in my time as an auditor and senior finance manager is the importance of having qualified staff, good internal control systems, honest corporate governance from the Board and a positive business culture.

I doubt if any of these key ingredients will change for businesses in the foreseeable future.

Doug McLean CPA/CA

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