It has come to my attention that I need to provide vision on what the future of financial reporting and auditing looks like.

I do have a vision which I will develop here in real time.

This will be a fluid process and I will be working on it as I receive feedback and gather more information from others. And I will post as I go so you can see my thoughts.

Overall Vision. Distinctly separate and specifically identify the compliance vs. the relevant or value add portions of the financial statements and related audit.


  • Financial Statements. The starting point. A cash based, historical cost, financial reporting model (included in this website) that is universal. It can be used internally, externally, with any currency, for budgeting and forecasting, integrated with block chain and AI, for any industry, vertically or horizontally in an organization, and many more. In addition, it is flexible and can be adjusted for balance sheet accruals while maintaining the cash based Sources and Uses. The balance sheet will contain 6 asset classes and the Sources and Uses will result in a cash based EBITDA.
  • US GAAP. The next step will be to remove US GAAP and replacing it with a simplified set of accounting standards supporting the financial statements. There will no longer be accruals, estimates, impairment testing, valuations, etc. No deferred taxes, derivatives, capital leases, AROs, depreciation and amortization, etc. See below for how these change.
  • The Audit. Imagine the compliance audit. Highly efficient, easy to perform and possibly not needed based on the confidence in the software providing the support of the numbers. This is what the commodity should be.
  • Technology. The format can be integrated into a block chain and AI environment because the financial information provided is all transaction oriented. Thus, a set of financial statements can be produced in real time at any time. Also, if the software is considered immutable, alteration of the data is assumed to be almost impossible. Thus, manipulation of the financial statements would be very difficult.
  • Fraudulent Financial Reporting. By removing the most abused classes (i.e. accounts receivable, accruals, etc.) and focusing the attention on Cash EBITDA. You can significantly reduce fraudulent financial reporting.
  • Reduced Cost. The cost of the compliance audit will be reduced significantly creating cash for companies to redirect to value add services or other investments.
  • Personnel. There will be a reduction in personnel both within the company (minor) and the audit firm (much more). These people can be redeployed to areas that create value to the company and the audit firm instead of being a "sunk" compliance cost.


  • Financial Statements. Flexibility. The financial reporting method in this website includes a statement called the Statement of Retained Earnings Reconciliation. What it allows for is truly remarkable. It allows for balance sheet accruals while not impacting the Sources and Uses cash based information. As an example, let's say an issuer wished to include payables and receivables on the balance sheet. The reporting method allows these to be recorded reflecting the impact on the cash based EBITDA in the Statement of Retained Earnings Reconciliation. The value is financial statements tailored for users and issuers instead of this one size fits all concept.
  • Accounting Standards. As US GAAP, will no longer be the "standard". A simplified set of standards will be used for the compliance audit. The current complex US GAAP may continue to exist but only as OCBOA or as individual standards, see below, to be implemented on a case by case basis as needed by the issuer and/or user.
  • The Audit. Should this additional information need to be audited (the receivables and payables in the example above). It can either be done in conjunction with audit as a separate requirement or as a totally separate item for internal or specific purposes. For example, a bank may have secured receivables and may wish to see a specific audit done on receivables in addition to the financial statements. Whether they are recorded or not is optional. Total flexibility. No more commodity.
  • Auditor. Once the compliance audit is stripped down. There is a never ending supply of value added services an auditor can perform. They can specialize in industries or fields or types of organizations. The focus would be consulting. Since it does not impact the compliance audit above, in my world, there is no independence problem. Even if there is, there is enough work to go around. The Big 4 already have much of this but the rest are still dominated by compliance work. That needs to change.
  • Staffing. Once the focus is on consulting work, firms will not need bells and whistles to find, hire and retain staff. The staff will seek the firm out.
  • Firm Revenue. Because it pays the bills. Value-add services are the key to increased revenue. Compliance revenue is capital and personnel intensive whereas consulting is value-add and companies and people will pay for value-add.
  • Fraud. The savings (which will be substantial) from the audit can be redirected to other internal and/or external measures including improving fraud prevention and detection.
  • Personnel. AS the increase in value added services will be significant. Audit firms can now train staff in the areas of value added services which used to be reserved for a select few. This will attract a whole new group of students to the profession.