Tackling
Technological Changes
State
Board Report
November
We are in the fourth industrial revolution, NASBA Regulatory
Response Committee Chair W. Michael Fritz said as he introduced an Annual
Meeting panel looking at how technology
is currently changing the profession. A. Michael Smith, national leader of
PricewaterhouseCooper’s US Internal Technology Audit Services Practice,
commented, “The use of blockchain
is only limited by our imagination.” He briefly explained that blockchain is a
form of applied cryptography, where anything
collected is integrated into the process. If any single part of the process is violated,
it becomes immediately visible. A simple application of blockchain
is distributed ledger technology (分散式帳本技術), which uses consensus (共識機制) to prove the accuracy of the underlying ledger.
Mr. Smith said blockchain is being employed for many different purposes,
including: to verify
green farming is being used; the United Nations is looking into using it for
establishing a global identity
for displaced people; and in the United Kingdom they are trying to apply it to
the welfare system to remove black marketing. One current problem with blockchain is
that it is a technological concept with no standardized framework, no COSO, Mr. Smith said.
There is nothing on the basic cryptography, but that framework is being
developed and he believes meaningful regulatory standards will emerge. Compliance is all about standardization,
he stated.
Jeanette Franzel, Public Company Accounting
Oversight Board member, said that when she thinks about blockchain, she wonders how it will impact the financial reporting
process: “I do think blockchain will
disrupt how we talk about global management. On the audit side, it will challenge some of those
processes. It raises a lot
of questions引起問題 about standards and
business models. Routine types of
testing can be done by computer, but how does that change the skill set that accountants need and
will that change happen fairly quickly?”
Changes in
the use of data and technology in the conduct of audits was added to the
PCAOB’s research agenda in December 2016 and has continued to be explored since
then, with the PCAOB speaking to the American Accounting Association, Financial
Reporting Council, AICPA, CPA firms and software developers. Ms. Franzel said
she would recommend that the PCAOB develop guidance, rather than standards, on how auditors are to work with these
advances. “What type of people are going to be doing this work?” she asked. Ms.
Franzel recommended that there be consistency
in the education required for this work. “I think there is a role for NASBA out
there for establishing good pathways to get the CPA designation with specialties,” Ms. Franzel said.
KPMG is working with universities to give them access to the technology the firm uses in
its audits and then helping the schools develop programs that maximize the 30 additional hours required for the CPA
license, Roger E. O’Donnell, senior audit partner and leader of KPMG’s Global
Audit Data and Analytics initiative, explained. He described what his firm is
doing to create the people they need. “We don’t believe we are creating data
scientists, but we are giving them skill
sets that we think are incredibly valuable,” he stated. KPMG is now supporting
140 students in the Master of Accounting with Data and Analytics program
developed with the Ohio State University College of Business and the Villanova
School of Business, but overall there are 1,000 students taking this program in
schools. He believes this type of cooperation with higher education is
something that all firms can support, but it is not without cost.
Mr. Smith agreed that it is critical for all of the large firms to make
substantial investments. He believes the distinction between tech and non-tech
audits is blurring and soon there will be no distinction.
NASBA is working on how to educate State
Boards on the use of the new technologies and has entered into discussions with
universities, professional associations, other regulators, software firms and
the large accounting firms, Mr. Fritz said. He noted State Boards are going to
be asked to respond to Focus Questions about their interest in such education
soon.
