From Enron to artificial intelligence: how has audit changed in the 21st century?

A company that was once one of the largest audit firms in the world all but disappeared within a few months. This event became the starting point of 21st-century audit.

Key facts

Enron and Arthur Andersen. The large US energy company Enron collapsed, and after it its auditor, Arthur Andersen, at the time one of the world's largest audit firms, also fell into crisis.
2002: the Sarbanes-Oxley Act. After this and other major accounting scandals, the Sarbanes-Oxley Act (SOX) was adopted in the USA. It created the PCAOB, the board overseeing the audits of public companies.
Who audits the auditors? The PCAOB registers and inspects audit firms, sets auditing standards and imposes sanctions on firms and individuals. With this, the era in which the profession in the USA regulated itself alone came to an end.
The legal basis in Uzbekistan. Under Article 9 of the Law "On Auditing Activity" (25 February 2021, No. ZRU-677), the international standards on auditing are the standards of auditing activity, and they must be published on the official website of the authorised body. The procedure for recognising and applying them is set by Resolution of the Cabinet of Ministers No. 171 of 11 April 2022.
The official texts are open. The page of the Ministry of Economy and Finance contains ISA 700 and ISA 705 on the auditor's report, together with model reports.
From sampling to full analysis. In a traditional audit, only part of thousands of entries was selected and checked (audit sampling). With the help of software, the auditor can now review the entire journal and single out unusual entries.
Artificial intelligence: an assistant, not a judge. An algorithm can find a suspicious entry, but establishing its cause, gathering evidence and signing the report remain the auditor's professional judgement and responsibility.

The 1980s, the 2000s and today: how has the auditor's work changed?

A general picture (prepared by the author); the timing of the transition differed between firms and countries.

Aspect	1980s	2000s	Today
Working papers	On paper, handwritten schedules	Spreadsheets and audit software	Electronic working files, shared platforms
Calculating tool	Calculator, later the spreadsheet	Computer, spreadsheet	Data analytics software, algorithms
Testing method	Mainly sample testing of paper documents	Sampling, with electronic extracts from the client's database	Reviewing the entire journal with software, digging into suspicious items
Standards	IAPC guidelines under IFAC and national rules	ISAs; from 2002 the IAASB, in the USA SOX and the PCAOB	International standards on auditing, in Uzbekistan also by law
Where the auditor's time goes	Calculating and leafing through documents	Comparing documents and electronic data	Assessing risks, analysing unusual situations

Example (prepared by the author, hypothetical figures)

The one-year journal of the "Mevali vodiy" cannery contains 48 000 journal entries. The auditor Malika cannot review them all by hand. She gives the software the following filters:

Filter	Why it may be suspicious	Found
Entries made on weekends	Outside the normal work routine	22
Very round amounts (such as exactly 50 000 000)	May be an estimated or artificial entry	9
Made on the last day of the year and reversed the following month	May be a sign of "window dressing" the result	6
Total		37

Out of 48 000 entries, Malika now digs deep into only 37: she requests their documents and talks with the responsible staff. Most may be explained by ordinary reasons. A few, however, may reveal a real problem.

From the ancient "hearing of accounts" to today's algorithms, the tools of audit have changed fundamentally. But the question is the same: does the recorded figure reflect reality?