Transcript 5 year plan - Rutgers University

Assurance in a Real Time
Economy
Alan Anderson, CPA
Chair – AICPA Assurance Services
Executive Committee
Managing Principal – Assurance Services
At LarsonAllen, LLP.
AGENDA
•
•
•
•
Our Instant Gratification Culture
The Current Reporting Model
Conceptual Framework
Assurance Services Executive Committee
(ASEC)
• How Do We Move This Forward?
Our Instant Gratification Culture
Consider the following:
• Does anyone talk “face to face” anymore?
• Do you sit and relax and enjoy a meal?
•
Who in the room doesn’t have a cell phone?
• When was the last time you read a historical financial
statement to make a decision?
Is Real Time Economy Already Here?
Consider the following:
• How do you make decisions on investment
performance?
• Do CFOs wait for month end financial statements to
inform their CEO what is going in the business?
• What information is used by stock analysts to make
“buy” or “sell” decisions?
• What happens to a stock price when a company
misses the “consensus earning estimate?”
• Why does the SEC place so much emphasis on
“forward looking information?”
The Real Time Economy?
I
Assurance In a Real Time Economy?
“Houston we’ve got a
problem”
• Current Assurance model is:
Not timely -- it’s after-the-fact
information
Not informative enough
Ignores many factors of
performance
Current Reporting Model
Historical Financial
Statements
Past
Lagging indicators…
 One size fits all
(GAAP)
 Ignores nonfinancial measures
 Reports results of
past decisions
Continuous
Reporting
Present
Future
Leading indicators…
 Tied to mission,
vision and values
 Tied to factors
critical to success
 Moves decision
criteria to forefront
Current Reporting Model
Continuous Reporting
Historical Financial
Statements
Past
Lagging indicators…
 Periodic
 Historical
 Cost-basis
 Financial only
 Statements
 Looking backward
Present
Future
Leading indicators…
 On-demand
 Real-time/future
 Value-basis
 Comprehensive
 Custom reports
 Looking forward
Common View of Real Time Assurance
• Exclusive Focus on What should get reported and
assured
• Currently Assurance over reporting of performance
measures along with their Historical Financial
statement has been slow to develop
• Regulators talk about changes as if management
should just “do it” and auditors can assure it.
– Readiness is a big issue
– XBRL is an Enabler
Real Time Assurance
Requires…..
• A Broader View than “WHAT” gets reported.
• Need to Also Focus on
– When to Report (Real Time)
– How will the Information get reported (print or electronic)
Real Time Assurance
Requires…..
• Greater Emphasis on Assurance on the Reliability of Systems,
Processes and People
(rather than a focus on the numbers)
And Finally
• Movement away from a “one size fits all reporting concept”
– Needs Industry Specific information
REAL TIME REPORTING - A CONCEPTUAL FRAMEWORK
5 Elements
Technology
Information
Dissemination
Deployment
•XBRL
(HOW)
Business
Information
Financial &
Non-Financial
Measures
.Business use
•Standards Setters
(WHAT)
Understandable
Disclosures
Foundational
Concepts
System
Reliability
(WHEN)
Corporate
Accountability
•SEC Plain English
•FASB Projects
•Continuous Audit
•Trust Services
•COSO ERM
•OCEG
•GRI
ELEMENTS OF
REAL TIME REPORTING
CONVERGENCE
TO “ REALTIME”
SCALABLE
System
Reliability
Corporate
Accountability
Understandable
Disclosures
Financial
and NonFinancial
Measures
Information
Dissemination
Migration Toward Real Time Assurance
CONVERGENCE
TO “Continuous
Assurance”
Deployment
System
Reliability
HOW
Information
Dissemination
Corporate
Accountability
WHAT
Understandable
Disclosures
Financial and
Non-Financial
Measures and
Information
AICPA – Assurance Services Executive Committee
(ASEC)
Mission:
To enhance the quality, relevance and usefulness
of information or its context for decision
makers and other users by
•
•
Identifying and prioritizing emerging trends and
market needs for assurance, and
Developing related assurance methodology
guidance and tools as needed.
ASEC OBJECTIVES
• Identify significant trends giving rise to assurance needs,
determine the potential assurance guidance that would
best meet those needs.
• Develop assurance guidance by creating suitable criteria
when necessary, and/or performance guidance as
appropriate
• Communicate new assurance methodologies, guidance
and opportunities to our members.
• Provide leadership in identifying and prioritizing
emerging assurance trends and market needs while
engaging and collaborating with users, preparers and
influencers.
ASEC - Risk in a Real Time Economy
• Risk – Real Time Economy Risk Model
– Early indicators of risk- how to identify, weigh and
manage
– Report on effectiveness of controls against COSO ERM
framework assess risk not just against controls over
financial reporting (may or may not need to be a 3rd party
opinion)
– Change the model so the opinion goes more to
observations around risk to start to close the expectation
gap, formalize feedback to clients around risk, consider
getting input from other professionals as well such as
rating agencies, analysts, etc.
ASEC Real Time Assurance
• Guidance on continuous auditing
(continuous control monitoring + data
monitoring)
• Data level assurance
• Control monitoring
• Data selection and validation
–
–
–
–
Data quality
Relevance
Customized business reports
Real time customizable business reports
REAL TIME ASSURANCE EXAMPLES:
• Continuous monitoring of transactions and processes
– Detection and corrective action
• Continuous monitoring of controls
– System controls will supplant manual controls
• Measurement and assurance across enterprise processes
• Most assurance costs are justifiable by increased data quality
• Data level assurance
– increases the efficiency
– Enhances accuracy of reporting
WHAT DO WE NEED TO DO?
• ASEC will work together along industry lines to
create thoughtful proposals for greater
transparency involving both simplification and
enhancement
• ASEC will Lead positive change, through
collaborative solutions
WHY DOES OUR GLOBAL PROFESSION
NEED TO BE INVOLVED?
• Everyone has a “stake” in this…
– Management needs real time information to run the
business
– Owners need real time information to provide the level
of oversight
– Creditors need real time information to make lending
decisions
– Auditors need to pay attention to the needs of the users
of real time information
• Continuous reporting and assurance is evolving in
the business community through independent
efforts
THE FUTURE OF ASSURANCE IN A REAL TIME
ECONOMY - SOME FINAL THOUGHTS
• The need for change in reporting impacts both
public and private companies
• Change will be evolutionary, not revolutionary
• New models will be developed for providing
assurance for on-line, real time, historical and
forward looking financial information, as well as
for performance measures
Questions and open discussion