Auditing as We Enter the 21st Century--What New Challenges Will Have To Be Met

Comments were presented on the role of auditors in the future. Some future projections are that auditors will be reviewing financial statements with assets and liabilities stated in current values. There will be an increased independence both for internal and external auditors growing out of the function and structure of audit committees which will be responsible for disclosing relevant information to the public. A company's internal auditors will report directly to the audit committee. The committee will hire the public accounting firm that audits the company's books. It will be composed of outside directors, not of company management personnel. There will be improvement in the disclosure of the unfunded or underfunded liability of State and local government pension funds. Presently, these retirement plans are not subject to Federal control. When currently accrued retirement costs are not fully recognized, the true costs of Government programs are understated. Auditors will be used to audit models of programs before they are undertaken and to render opinions on the reliability of factors used in estimating the cost of these programs before they are started. An increasing number of reviews will be directed toward determining the economy, efficiency, and effectiveness of operations within corporations. Better ways to measure the costs and benefits of many things that today are imprecise and subject to much controversy will be found. As more and more financial transactions are handled by automatic data processing, auditors will require new audit procedures to decide whether financial transactions were handled properly. Better audit planning will be needed so that many tasks now performed sequentially can be performed simultaneously. Auditors will have to rely far more on the effective functioning of systems than they do now. Internal controls will become increasingly important. A complete new set of accounting controls based on computer operations will soon be needed. All controls will have to be weighed against the cost involved. Where management control systems are properly developed and are functioning properly, the possibility of fraud, theft, or error is greatly diminished. New auditing procedures which provide for greater assurance against fraud must be developed. The auditors of the future will have to have extensive and continuing education.