After Deloitte advanced its head of audit to CEO in February, the firm has appointed Joseph Ucuzoglu chairman and CEO of subsidiary Deloitte & Touche to take charge of the audit practice.
Most recently national managing partner for government, regulatory, and professional matters, Ucuzoglu will lead the firm’s audit practice as the audit profession continues to take heat from the Public Company Accounting Oversight Board over audit quality. “The audit profession is at an inflection point,” said Cathy Englebert, new CEO of Deloitte, in a statement. “Capital markets, investors and regulators, and our clients and professionals, want audits that are evolving with the pace of change in the business landscape. With Joe’s leadership we are positioned to help shape the future of the audit in exciting ways.”
As the new head of audit for Deloitte, Ucuzoglu says he has a handful of near-term priorities that focus on innovating the audit practice to elevate audit quality. “We want to really lay out a bold vision for the future of the audit profession,” he says. “We think the demand for assurance services in capital markets will continue to grow into areas that are top of mind for the business community and capital markets.” That includes areas like cyber-security and enterprise risk management, he says.
Ucuzoglu acknowledges regulators and investors are demanding more from auditors. The PCAOB’s inspection results for the major firms have continued to turn out disappointing results, with rates of deficiency remaining high over the past few years. For Deloitte, however, deficiency rates have fallen, from 42 percent in 2011 (meaning 42 percent of audits inspected were deemed unacceptable) to 25 percent in 2012 and 28 percent in 2013.
“Clearly we have to elevate our performance to meet the expectations of the marketplace,” he says. “That’s going to require evolving the way we do our work with respect to our core service of auditing financial statements and internal controls.” The firm is investing heavily in developing more high-tech audit approaches, he says, using data analytics and artificial intelligence to look at larger sample sizes or even entire populations of data, he says.
Such approaches enable auditors to more easily identify outliers and zero in on risks. “It frees up our people from the more routine tasks and enables them to deliver higher quality work with more sophisticated insights to clients,” he says. “Everybody is out there talking about these things at the 30,000-feet level but we’re at a point of having live tools.” Some are in widespread use, he says, and others are still in pilot testing with a handful of clients.
Ucuzoglu says innovation of the traditional audit approach is his highest priority. “The audit profession has for too long been stuck in the ways of the past,” he says. “We’re really looking to change that. We’ve invested tens of millions of dollars in advanced technologies, and we expect to spend several million more in the next several years.”
Another key focus, he says, is on leveraging the firm’s consulting services to advance audit quality, even as regulators have raised doubts in the past few years about whether permitting audit firms to build up consulting practices is healthy for the audit profession. PCAOB Chairman James Doty has pondered aloud whether firms that rely on consulting services for revenue growth are not adequately focused on building and maintaining healthy, vibrant audit practices.
In Ucuzoglu’s view, the growth of consulting work is healthy for the audit business, assuring that the firm doesn’t try to sell consulting services to audit clients in violation of independence rules. “Our consulting revenue is coming from clients we don’t audit,” he says. “But there’s tremendous value to have that human capital in the right place. These are not legacy auditors building innovative applications for audit. It’s auditing working with technology specialists that is going to improve audit quality. When managed correctly, the two complement each other. They do not detract from each other.”
The new audit leader also is open to some of the new direction regulators are heading in terms of auditing standards, especially the call for a new approach to audit reporting where auditors would be required to say more about what they do and what they see in the course of the audit. “We’re going to have to be more open and more transparent about what we do and what we’ve found,” he says. “So this notion of auditors expanding their auditing reporting -- we want to work collaboratively to bring that to life. We do believe it will continue to elevate the transparency and enhance the confidence in the work we do.”
Ucuzoglu has worked previously as senior advisor to the chief accountant of the Securities and Exchange Commission. He’s a board member for the U.S. Chamber of Commerce and a member of the executive committee of the SEC Financial Reporting Institute at his alma mater, the University of Southern California, among other professional affiliations.