Auditology: The Science of Audit Improvement

In their book, Managing the Hell Out of Your Audit, authors and battle hardened auditors William Englehaupt and Brian Bilsback explain that "auditology" is the systematic art and science of improving audits which are based on a battle-tested framework derived from decades of  hands-on experience across thousands of real-world audit engagements at major accounting firms.

The authors point out that 40% of audits are failing. A POGO study says that each of the Big 4 audit firms botched at least 20% of their audits. The breakdown: Deloitte botched 20%; PWC botched 23.6%; EY botched 27.3%; KPMG botched 50%.

The authors point out in their book that, "Artificial Intelligence (AI) is often viewed as a kind of magical "pixie dust" that firms can sprinkle on a problem to solve it." (page 7)

The authors go on to on to state that artificial intelligence can't save broken audit processes. The authors explain that Auditology applies proven methodologies including Lean, Six Sigma, and Total Quality Management specifically to audit environments.  I would add Agile principles to that list.

There are a lot of very good ideas proposed by Auditology.  Accounting & Audit by Design (A&AD) Framework also has a lot of very good ideas. Another good idea is what I call the Audit Evidence Graph.

But here is the deal.  The Financial Data Platform points out that accounting information systems are changing. We have an opportunity to leverage the characteristics of accounting, fix accounting information systems and processes leveraging artificial intelligence effectively, leverage truly talented people, and build a new audit platform that works with that new financial data platform; processes that are industrial strength.

We need to think AI-first, Digital-first, Graph-first. We need to understand that many things will be not just refactored but entirely overhauled as we seek to take full advantage of artificial intelligence.

Remember, the map is not the territory. Understand the Kuhn Cycle. The "normal science" does not have a replacement you can "touch and feel" quite yet.  But, it is getting there. It is on its way.  Normal science is about to shift.

And this new science will be applied not only to audits.  The new science will be applied to the full spectrum of assurance including compilations, reviews, and audits.  Internal auditors and third party independent auditors.  This "refactoring" or "redesign" will not only impact financial information systems; the financial information systems are only a sign of what will also occur for nonfinancial information systems.  Financial information systems have a lot more to work with because they are basically a computational substrate.

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