Assurance Service Opportunities: Implications for Academia

The market for audits has been flat for a number of years with no clear prospect of a turnaround. The AICPA's Special Committee on Assurance Services (1997) publicized that fact and responded by identifying new services and recommending processes for the ongoing identification and development of additional services. The premise was always to build on the audit tradition, and steady (though not rising) demand for audits was projected into the future. The audit tradition is a professional asset of incalculable value. It derives from the marketplace need for high-quality, decision-making infonnation. The financial statement audit provides assurance that an information set presented to investors and creditors is reliable. But the marketplace need for high quality information is far greater than the need for reliable historical-cost-basis financiai statements. Thus, assurance services not only respond to the growth problems of the audit industry, they also adjust the audit tradition to the wider marketplace it long ago was destined to serve, or so it seems in retrospect. The Special Committee on Assurance Services set in train three types of changes, as illustrated by figure 1. The smaller enclosed cube represents tbe profession's revenue fi-oin financial statement audits. The larger cube extends three dimensions of the financial statement audit, which can be abbreviated as the who, the what and the how of the service. The who refers to the CPA's customers (who will expand fi-om investors and creditors to include entities' customers, employees, managers, directors, and suppliers of goods and services). Tbe what refers to the service provided (which will embrace assurance on nonfinancial information and systems). The how refers to the service-delivery technologies (which will include real-time audit techniques, as well as evaluation of encryption, firewall strategies and database design). Services will include providing assurance on nonfinancial information and on all sorts of information systems. The assurances may pertain to the relevance as well as the reliability of the information. Service-delivery technologies will address a broader range of potential defects in information and information systems, because information will be produced and presented in different forms. Instead of evaluating manual detection and correction of errors, for example, assurers will evaluate the design of systems for their preventive controls. Real-time information reports cannot wait for manual detection, so the effectiveness of preventive controls will determine the reliability of the information decision makers receive. The CPA's customer base can (and should) be all users of decision-making information. They include senior managers or other employees, members of corporate or