How reconceptualizing audit as an innovation ecosystem could finally close the expectations gap that’s plagued the profession for decades
The Definition of Insanity: Repeating the Same Audit Reforms and Expecting Different Results
Picture this: It’s 2024, and yet another major corporate scandal has rocked the business world. Investors have lost millions. Jobs have vanished. Public trust in financial markets has plummeted. And once again, everyone asks the same question: “Where were the auditors?”
If this scenario sounds familiar, that’s because you’ve seen this movie before. Many times. In fact, if you’ve been paying attention to the audit profession over the past few decades, you might feel like Bill Murray in Groundhog Day—trapped in an endless loop where the same events keep repeating with frustrating predictability.
Corporate crisis happens. Public outrage erupts. Regulators investigate. Reforms are proposed. Standards are tightened. The profession promises to do better. And then… a few years later, we’re right back where we started.
Welcome to what a groundbreaking new study calls the audit profession’s very own “Groundhog Day”—a cycle of recurring failures, repetitive reforms, and persistent disappointment that has defined auditing for generations. But this time, one innovative voice is proposing something radical: What if the problem isn’t that we need better audit rules, but that we need to completely reimagine what audit actually is?
The Stubborn Reality: Why the Audit Expectations Gap Never Goes Away
Let’s start with an uncomfortable truth: despite decades of reforms, regulatory initiatives, and professional promises, auditing still suffers from what academics call the “audit expectations gap”—the persistent disconnect between what society expects from audits and what auditors actually deliver.
What Everyone Thinks Auditors Do:
- Detect fraud and financial manipulation
- Guarantee the accuracy of financial statements
- Alert investors and regulators to impending corporate disasters
- Serve as watchdogs protecting the public interest
What Auditors Actually Do (According to Current Standards):
- Express an opinion on whether financial statements are “materially true and fair”
- Provide “reasonable assurance” (not absolute certainty)
- Focus primarily on historical financial data, not future viability
- Report primarily to company members, not the broader public
See the gap? It’s enormous. And it’s been enormous for decades.
Consider these sobering statistics from recent years:
- The UK’s Financial Reporting Council found that in 2024/25, only 38% of inspected audits at medium and small firms met quality standards, with 31% requiring significant improvements
- The Public Company Accounting Oversight Board revealed that 46% of EY’s audits in 2022 were defective
- Scandals like BHS (2016), Carillion (2018), Patisserie Valerie (2019), Thomas Cook (2019), Wirecard (2020), and the Post Office Horizon disaster have all raised fundamental questions about audit effectiveness
Yet here’s the kicker: The reforms proposed today eerily mirror recommendations made 30+ years ago. The 2019 Brydon review in the UK, examining audit quality and effectiveness, explicitly noted that many recommendations from the 1992 McFarlane Committee report remained “relevant and applicable” 27 years later.
We’ve been stuck in Groundhog Day for at least three decades.
Why the Usual Responses Keep Failing
Every time a corporate scandal erupts, the audit profession deploys a familiar defense playbook:
Defense #1: “You misunderstand our role.” Translation: We’re not fraud detectors; we just check if the accounting numbers follow the rules.
Defense #2: “People expect too much from us.” Translation: Society’s expectations are unreasonable given our legal mandate.
Defense #3: “The real problem is bad management, not bad auditing.” Translation: Companies fail because they’re badly run, not badly audited.
Defense #4: “This is just one bad apple.” Translation: This failure doesn’t represent the general quality of audit work.
Defense #5: “Audit is just one piece of the corporate governance puzzle.” Translation: Don’t blame us when the whole system fails.
Sound familiar? These aren’t new arguments—they’ve been repeated for decades. And while there’s often truth in each defense individually, collectively they reveal something troubling: the profession has become remarkably skilled at deflecting blame without fundamentally evolving.
Meanwhile, the reforms that do get implemented tend to follow predictable patterns:
- Stricter compliance requirements
- More detailed standards
- Enhanced documentation
- Additional review procedures
- Tighter independence rules
- Rotation requirements
All of these make audits more standardized, more process-driven, and more defensive. But do they actually deliver what society needs? The recurring scandals suggest not.
The Radical Reimagining: Audit as an Innovation Ecosystem
Enter Martin Martinoff, a former Innovation Adviser and Programme Lead for the Institute of Chartered Accountants in England and Wales (ICAEW) AuditFutures Initiative. In a thought-provoking paper published in Accounting and Business Research in 2024 titled “Escaping ‘Groundhog Day’: the transformative possibilities of reconceptualising audit,” Martinoff proposes something genuinely new.
His central thesis is elegantly simple yet profoundly disruptive: Stop thinking of audit as a standardized compliance function. Start thinking of it as an innovation ecosystem.
What Does This Mean in Practice?
Traditional View of Audit:
- Audit is a standardized process
- Uniformity and consistency are paramount
- Innovation threatens quality and comparability
- Auditors follow prescribed procedures
- The profession resists change to maintain stability
Ecosystem View of Audit:
- Audit is a diverse, evolving environment
- Variation and adaptation are strengths
- Innovation drives relevance and value
- Auditors act as “ecosystem engineers”
- The profession embraces continuous evolution
This isn’t just semantic wordplay. The implications are transformative.
In natural ecosystems, diversity creates resilience. Different organisms fill different niches, respond to different conditions, and collectively create a robust, adaptive system. Monocultures, by contrast, are fragile—one disease or environmental change can wipe them out entirely.
The audit profession, with its emphasis on standardization, has effectively created a monoculture. Every audit follows similar procedures, uses similar methodologies, and produces similar outputs. This uniformity was supposed to ensure quality and comparability. Instead, it’s created rigidity, stifled innovation, and failed to adapt to the rapidly changing business environment.
The Power of Ecosystem Thinking
Let’s unpack what thinking of audit as an ecosystem actually means and why it could be revolutionary.
1. Embracing Functional Diversity
In a natural ecosystem, you don’t have just one type of organism. You have producers, consumers, decomposers—each playing distinct roles that collectively maintain system health.
In an audit ecosystem, this would mean recognizing that different audits serve different purposes and should employ different approaches:
Risk-Based Audits might focus on high-risk areas with sophisticated data analytics and continuous monitoring—perfect for complex financial institutions or tech companies with volatile business models.
Compliance-Focused Audits might prioritize regulatory adherence and control testing—ideal for heavily regulated industries like pharmaceuticals or utilities.
Value-Creation Audits might emphasize operational insights and forward-looking information—particularly valuable for companies in growth phases or strategic transitions.
Public Interest Audits might prioritize transparency and stakeholder communication—critical for companies with significant social impact or public responsibility.
Currently, we try to force all audits into the same mold. An ecosystem approach would celebrate and leverage this diversity.
2. Auditors as “Ecosystem Engineers”
In ecology, ecosystem engineers are organisms that create, modify, or maintain habitats in ways that benefit the entire system. Think of beavers building dams that create wetlands, or coral polyps constructing reefs that support diverse marine life.
If auditors are ecosystem engineers in an audit ecosystem, their role transforms from passive reviewers to active shapers of corporate information environments:
- Creating Information Infrastructures: Helping companies develop better data collection, analysis, and reporting systems
- Facilitating Transparency: Opening up communication channels between companies and stakeholders
- Enabling Trust Networks: Building confidence structures that go beyond simple pass/fail judgments
- Promoting Innovation: Encouraging experimentation with new reporting formats, new assurance models, and new value-creation approaches
This is radically different from the current model where auditors show up annually, check last year’s numbers, and leave.
3. Dynamic Adaptation Instead of Static Compliance
Ecosystems are dynamic—constantly evolving in response to environmental changes. Species adapt, relationships shift, and the system as a whole maintains balance through continuous adjustment rather than rigid structure.
An audit ecosystem would similarly prioritize adaptability:
Continuous Evolution of Standards: Rather than waiting for major scandals to trigger periodic reforms, standards would evolve continuously based on emerging risks, technological capabilities, and stakeholder needs.
Flexible Methodologies: Auditors would have latitude to employ approaches best suited to specific circumstances, rather than following lockstep procedures.
Rapid Integration of Innovation: New technologies (AI, blockchain, continuous auditing, real-time monitoring) would be incorporated as they prove valuable, not blocked by standards written for previous eras.
Responsive to Stakeholder Needs: The system would actively seek and respond to what users actually need, rather than telling them what they should expect.
Why This Matters More Than Ever: The Technology Disruption
The ecosystem approach isn’t just theoretically interesting—it’s becoming practically necessary as technology fundamentally transforms both business and auditing.
The AI Revolution in Auditing
Artificial intelligence is already transforming audit work:
- Robotic Process Automation (RPA) is eliminating routine tasks like data entry and basic reconciliations
- Machine learning algorithms are detecting anomalies and patterns that humans would miss in massive datasets
- Natural language processing is analyzing contracts, agreements, and communications at scale
- Predictive analytics are identifying emerging risks before they materialize
A 2024 study of technological innovation in auditing using disruption theory found that technology is currently being used primarily for “sustaining innovation”—making current audits faster and cheaper by replacing menial tasks historically done by junior auditors.
But here’s the critical insight: Strategic disruption of the audit industry appears inevitable. Technology is already being used by new entrants in non-regulated markets to deliver different kinds of assurance services.
The audit profession faces a stark choice: Self-disrupt and embrace the ecosystem model while it still can, or wait for external disruption to force painful transformation later.
The Challenge of Rigid Standards in a Tech-Driven World
Current audit standards were written for a paper-based, sample-testing, annual-review world. They struggle to accommodate:
- Continuous auditing and real-time monitoring
- Blockchain-based verification of transactions
- AI-powered risk assessment and testing
- IoT devices providing automated asset tracking
- Cloud-based collaborative audit platforms
Research shows that regulatory uncertainty about adoption of emerging technologies significantly hinders innovation. When standards can’t keep pace with technology, the profession falls behind.
An ecosystem approach, with its emphasis on diversity and adaptation, would naturally accommodate technological innovation. Rather than asking “Does this follow our established procedures?” the question becomes “Does this enhance the audit ecosystem’s ability to serve its purpose?”
The Brydon Vision: Expanded Purpose for Audit
The ecosystem concept aligns powerfully with another recent reform proposal: the Brydon review’s recommendation that the UK government give legislative backing to a significantly expanded purpose for audit.
Traditional audit purpose has been narrow: Express an opinion on whether financial statements present a true and fair view. That’s it.
Brydon’s expanded vision includes:
- Forward-Looking Information: Assurance on whether companies can continue as going concerns, not just whether past numbers are accurate
- Risk Reporting: Communication about key uncertainties and risks facing the business
- Internal Control Assessment: Evaluation of whether companies have robust systems to catch problems
- Public Interest Perspective: Explicit recognition that audit serves broader society, not just company shareholders
This expanded purpose naturally fits an ecosystem model. Different stakeholders need different things from corporate reporting. An audit ecosystem could evolve different species of assurance to meet these varied needs, rather than forcing everything through the narrow filter of financial statement audit.
Real-World Implications: What Would Change?
Let’s get practical. If the audit profession embraced the ecosystem model, what would actually be different?
For Audit Firms:
Innovation Culture: Firms would invest heavily in R&D, experimentation, and continuous improvement—viewing innovation as core to audit quality rather than a threat to it.
Diverse Service Lines: Rather than one standardized audit product, firms would offer varied assurance services tailored to different needs, industries, and circumstances.
Technology Integration: Bleeding-edge tools would be deployed rapidly, with standards supporting rather than hindering adoption.
Talent Development: Training would emphasize critical thinking, adaptability, and innovation rather than compliance with established procedures.
For Regulators:
Principles Over Rules: Regulation would shift from detailed prescription toward outcome-focused principles that allow for innovative approaches.
Regulatory Sandboxes: Safe spaces for testing new audit methodologies, technologies, and reporting formats before they’re mandated or prohibited.
Continuous Evolution: Standards would be updated frequently in response to emerging best practices, rather than locked in place until the next major scandal.
Diverse Acceptable Practices: Recognition that different audit approaches can all deliver quality, rather than insisting on one “right” way.
For Companies:
Customized Assurance: Ability to work with auditors to design assurance approaches that actually provide value to their specific circumstances.
Collaborative Relationships: Auditors acting as partners in strengthening information quality and transparency, not just compliance checkers.
Forward-Looking Insights: Assurance services that help companies anticipate and manage risks, not just verify historical results.
Stakeholder Communication: Enhanced transparency that actually builds trust with investors, regulators, and the public.
For Investors and the Public:
Meaningful Information: Audit reports that communicate genuinely useful insights about company health and risks, not just technical compliance statements.
Appropriate Expectations: Clearer understanding of what different types of assurance provide and what they don’t.
Greater Trust: Confidence that the audit ecosystem is evolving to meet actual needs rather than defending outdated practices.
Better Protection: More effective early warning systems that identify problems before they become catastrophes.
The Challenges: Why This Won’t Be Easy
Let’s be realistic: Transforming audit from a compliance function to an innovation ecosystem faces enormous obstacles.
Cultural Resistance
The audit profession has spent decades building a culture centered on:
- Risk avoidance
- Defensive practice
- Strict compliance
- Uniformity and standardization
- Protecting against liability
Asking this culture to embrace innovation, experimentation, and diversity is like asking a cautious accountant to become an entrepreneurial startup founder. It’s a fundamental identity shift.
Liability Concerns
Innovation creates uncertainty. Uncertainty creates risk. Risk creates liability exposure. Law firms make fortunes suing auditors when things go wrong.
This creates powerful incentives to stick with established practices—even when they’re ineffective—because at least they’re defensible in court. “We followed the standards” is a much stronger legal defense than “We tried something innovative.”
Regulatory Conservatism
Regulatory bodies, burned by past scandals, tend toward conservatism. Their mandate is to prevent problems, which naturally leads to:
- Detailed rules
- Restricted discretion
- Proven practices
- Resistance to change
Convincing regulators to embrace ecosystem thinking—which by definition involves diversity, experimentation, and evolution—requires a fundamental shift in regulatory philosophy.
Economic Pressures
Audit fees have been under pressure for years. Companies view audit as a grudging compliance cost, not a value-adding service. This creates incentives to minimize audit investment, standardize approaches for efficiency, and resist innovation that might increase costs.
An ecosystem approach, with its emphasis on customization and value-creation, likely requires different economic models. That’s a hard sell in the current market.
The “Too Big to Fail” Problem
The audit market is dominated by the Big Four firms (PwC, Deloitte, EY, KPMG), which together audit almost the entire FTSE 350 in the UK and similar proportions globally. These firms are:
- Large and bureaucratic
- Risk-averse due to massive liability exposure
- Locked into established business models
- Subject to intense regulatory scrutiny
Asking these behemoths to transform into agile innovation ecosystems is like asking oil tankers to suddenly become speedboats. The physics don’t work easily.
Signs of Hope: Innovation Already Happening
Despite the challenges, green shoots of ecosystem thinking are already emerging:
Technology Adoption Accelerating
According to the International Auditing and Assurance Standards Board (IAASB), emerging technologies are increasingly being investigated and connected to audit and assurance services:
- Data Analytics: Moving from sample-based testing to population-wide analysis
- AI and Machine Learning: Automating risk assessment and anomaly detection
- Blockchain: Enabling real-time transaction verification
- Continuous Auditing: Shifting from annual reviews to ongoing monitoring
- Cloud Platforms: Facilitating collaboration and data sharing
A 2024 global study identified more than 100 technology innovator companies working on audit-relevant applications. The innovation is happening—it just needs ecosystem thinking to flourish.
New Assurance Models Emerging
Beyond traditional financial statement audit, new forms of assurance are proliferating:
- Sustainability Assurance: Verification of ESG (Environmental, Social, Governance) reports
- Cybersecurity Attestation: Assurance on information security controls
- Process Assurance: Verification of operational efficiency and effectiveness
- Forward-Looking Assurance: Reviews of forecasts, projections, and strategic plans
These different “species” of assurance are naturally creating ecosystem diversity, even if the profession hasn’t explicitly embraced that framing.
Regulatory Evolution
Some encouraging regulatory developments:
- Regulatory Sandboxes: Spaces for testing innovative approaches before full implementation
- Principles-Based Standards: Shift from prescriptive rules toward outcome-focused guidance
- Technology Guidance: New standards accommodating AI, automation, and continuous monitoring
- Expanded Scope: Recognition that audit must address more than just historical financial statements
The Brydon review’s call for legislatively backed expansion of audit purpose represents a watershed moment—official recognition that the traditional model is insufficient.
Firm Innovation Initiatives
Major audit firms are investing significantly in innovation:
- Dedicated innovation labs and incubators
- Chief Innovation Officer roles
- Partnerships with technology companies
- Internal venture capital funds
- Continuous experimentation programs
For example, CBIZ launched AskCBIZ.ai in 2023, an AI-powered tool leveraging Microsoft Azure OpenAI to improve team member productivity and efficiency. These investments signal growing recognition that innovation is essential, not optional.
The Path Forward: Practical Steps Toward Ecosystem Audit
So how do we actually get from Groundhog Day to an innovation ecosystem? Here’s a roadmap:
For Audit Firms:
- Establish Innovation as a Strategic Priority
- Create dedicated innovation teams with resources and mandate
- Measure and reward innovation, not just compliance
- Build partnerships with technology companies and research institutions
- Experiment Systematically
- Pilot new approaches in controlled settings
- Learn from failures without punishing them
- Scale successes rapidly across the organization
- Embrace Diversity
- Develop specialized audit methodologies for different industries and circumstances
- Allow teams latitude to adapt approaches to specific needs
- Celebrate rather than suppress variation in practice
- Invest in Talent Development
- Hire technologists, data scientists, and innovation specialists alongside traditional accountants
- Train all auditors in emerging technologies and adaptive thinking
- Create career paths that reward innovation and thought leadership
For Regulators:
- Shift to Principles-Based Regulation
- Focus on outcomes and objectives rather than prescribing specific procedures
- Allow multiple paths to achieving quality
- Update standards continuously rather than episodically
- Create Safe Spaces for Innovation
- Establish regulatory sandboxes where firms can test new approaches
- Provide rapid feedback on innovative proposals
- Disseminate successful innovations as emerging best practices
- Collaborate Across Stakeholders
- Convene firms, companies, investors, and academics to discuss future directions
- Learn from innovations happening outside formal audit (e.g., in non-regulated markets)
- Stay ahead of technology developments rather than reacting to them
- Reframe the Social Contract
- Explicitly acknowledge that audit serves broad public interest, not just shareholders
- Expand the formal purpose of audit to encompass forward-looking and risk information
- Clarify realistic expectations while expanding actual scope
For Companies:
- Engage Actively with Auditors
- View audit as a value-adding partnership, not a compliance burden
- Co-create audit approaches that provide genuinely useful insights
- Share information openly to enable more meaningful assurance
- Support Innovation
- Be willing to pilot new audit technologies and methodologies
- Provide feedback on what information would actually be useful
- Recognize that customized approaches may cost more but deliver greater value
- Prioritize Quality Over Minimum Compliance
- Select auditors based on value-add potential, not just lowest price
- Invest in robust information systems that enable better assurance
- View transparency as strategic advantage, not regulatory obligation
For Standard-Setters and Academics:
- Research Ecosystem Dynamics
- Study how diversity affects audit quality and value
- Investigate successful innovations and their transferability
- Develop frameworks for evaluating non-traditional audit approaches
- Rethink Audit Education
- Teach adaptive thinking alongside technical standards
- Emphasize technology, data science, and innovation
- Prepare future auditors for continuous evolution, not static practice
- Lead the Conversation
- Publish thought leadership on audit’s future
- Convene diverse stakeholders to explore new models
- Challenge conventional wisdom constructively
Why This Matters Beyond Audit
The transformation from compliance function to innovation ecosystem isn’t just about fixing audit—it’s a case study in how professions can escape their own versions of Groundhog Day.
Every mature profession faces similar challenges:
- Resistance to disruptive innovation
- Regulatory structures built for past conditions
- Cultural attachment to established practices
- Economic incentives that discourage change
- Liability concerns that favor defensive behavior
Medicine, law, accounting, education—all struggle with these dynamics. The audit ecosystem model offers lessons applicable far beyond financial reporting:
Embrace Diversity: Standardization that made sense in stable environments becomes rigidity in dynamic ones. Diversity creates resilience.
View Innovation as Essential: Treating innovation as optional or threatening ensures irrelevance. It must be central to identity and practice.
Focus on Purpose, Not Process: Getting stuck on “how we’ve always done it” causes disconnect from “what we’re trying to achieve.”
Evolve Continuously: Big-bang reforms every decade don’t work. Continuous small adaptations compound into meaningful transformation.
Think Systemically: Professions aren’t isolated—they’re ecosystems embedded in larger systems. Change requires understanding and working with these connections.
Conclusion: Time to Wake Up to a New Day
We’ve been living Groundhog Day in audit for too long. The same scandals, the same outrage, the same reforms, the same disappointments, repeating endlessly.
Albert Einstein allegedly defined insanity as doing the same thing over and over while expecting different results. By that definition, the audit profession’s approach to reform has been insane.
It’s time for something genuinely different.
The ecosystem model—viewing audit as a diverse, adaptive, innovative environment where auditors act as ecosystem engineers shaping corporate information landscapes—offers a way forward that’s fundamentally different from previous reform attempts.
It won’t be easy. Cultural resistance, liability concerns, regulatory conservatism, and economic pressures all stand in the way. But the alternative—continuing to repeat the same patterns while hoping for better outcomes—isn’t really an alternative at all.
Technology is already disrupting audit whether the profession likes it or not. New forms of assurance are emerging. Stakeholder expectations continue evolving. The question isn’t whether audit will transform, but whether it will transform proactively on its own terms or be forced to transform reactively when external disruption makes the current model unsustainable.
The ecosystem model offers a roadmap for proactive transformation—one that could finally close the expectations gap, restore public trust, deliver genuine value, and position audit as a vital force for transparency and accountability in an increasingly complex business environment.
It’s time to wake up to a new day. The future of audit depends on thinking completely differently about what audit is and can be.
The clock is ticking. The question is whether the profession will hit the snooze button one more time—or finally wake up and embrace a new dawn.
About the Research
This article is based on “Escaping ‘Groundhog Day’: the transformative possibilities of reconceptualising audit” by Martin Martinoff, published in Accounting and Business Research in 2024. The paper proposes viewing audit as an innovation ecosystem with auditors as ecosystem engineers, arguing this conceptual reconfiguration could enhance audit’s social purposefulness and public interest orientation by promoting functional diversity over excessive standardization.
Further Reading
- Brydon Review (2019): “Assess, Assure and Inform: Improving Audit Quality and Effectiveness”
- IAASB (2024): “Innovation in Audit and Assurance: A Global Study of Disruptive Technologies”
- Christensen’s “The Innovator’s Dilemma” on disruption theory
- Ecosystem engineering concepts in organizational ecology
Think Differently What would audit look like in your industry if it were designed as an innovation ecosystem rather than a compliance checklist? How might it better serve your actual needs? The conversation starts now.
