TAKEAWAYS
Gone is the image of a traditional auditor in a pinstripe suit with thick glasses, a thick briefcase, and an even thicker notebook. But while auditors may have substituted their notebook for a laptop, they must also invest in the right technology to replace dated processes and elevate audit quality in today’s complex business environment. Quality is essential for assuring the audit is being conducted correctly and efficiently.
Clients, too, expect their auditors to be current with new technologies, stay abreast of the evolving regulatory changes and professional standards, and maintain a skilled workforce that can provide the highest level of service. Virtual audits are now becoming quite common, and technology is transforming the audit process through automation and access to real-time data and analytics.
Quality, talent, and technology are all key components for success in this new era of auditing. As firms continue to invest in these areas, they will ensure that their audits remain compliant with regulations while also providing valuable insights for their clients and into their own operations.
A quality audit should do more than just detect financial reporting issues; audits must drive continuous improvement, enhance risk management, elevate financial planning, and provide reliable financial information in the capital markets.
Audit technology is raising the bar
Due to the recent increase in fraud cases, such as the Wirecard, Patisserie Valerie, and Luckin Coffee incidents, there’s greater scrutiny of the audit industry and its processes, prompting a push towards digitalisation to drive business success and ensure business continuity.
The nature of auditing and the auditing standards against which performances are measured is constantly evolving. Regulatory changes, such as the ISQM1, specifically demand firms to establish quality objectives in relation to resources provided by service providers. This regulation also makes the firm solely responsible for the design, implementation and operation of its own system of quality management (SoQM).
The audit industry is transitioning as it evaluates the right tech investments to assume a more strategic role in driving business outcomes while traversing a constantly evolving regulatory environment.
Auditors today must have the capacity to navigate the complex regulatory landscape and meet standards like SSA 505 issued by The Auditing and Assurance Standards Board (AASB) and others for high-quality audits.
The COVID-19 pandemic and its widespread economic and social repercussions around the globe, and the rise of hybrid work models have increased the focus on improving risk assessment and management.
These shifts have revealed several areas of improvement to the audit process that need to be promptly addressed as we move into the future of work. Next-gen auditors also must demonstrate higher levels of critical thinking and judgement for greater value creation.
As such, next-gen auditors must speed up audit processes using the right technology investments. Their expectations from technology are to:
Technologies such as data analytics, cloud, artificial intelligence (AI), and robotic process automation (RPA) are building greater audit resilience in the face of a constantly evolving global business environment
According to the Future-Proofed study conducted by KPMG and Forbes Insights, nearly all business leaders (98%) say their external audit firm uses advanced technology extensively. Most of the business leaders have their eyes on AI (61%), smart analytics (50%) and RPA (48%).
Clearly, next-gen auditors need technology to deliver high-quality audits, save time and money, mitigate fraud risk, and build greater trust in capital markets.
Audit firms are under increasing pressure to drive productivity while reducing pressures on a shrinking number of staff.
Millennials and Gen Z are now the dominant demographic in the workplace. Technology-powered processes, in this case, not only drive up business value but also play a central role in attracting this digitally savvy workforce, who are looking for state-of-the-art tools and processes.
Technology allows for better allocation of limited resources, reduces workloads and redundant tasks, enables people to automate tasks, and provides better analysis in appropriate areas easily. This helps to ensure accuracy and consistency in the audits conducted by the auditors, which leads to better results for both the auditors and their clients.
Given the shifts in workplace demographics, firms that still run a manual, non-digital, and labour-intensive environment will struggle to hire and retain top talent.
Organisations must also identify training needs and upskill their existing workforce to leverage technology-enabled audit processes, conduct guided audits with precision, and proactively identify risk areas. Easy-to-use technology platforms are crucial to upskilling initiatives and driving greater digitalisation of audit firms.
As we concur that next-gen auditors need next-gen technology solutions powering up their work, moving along this path demands a clear strategy for adoption. After all, the rate of digital transformation failing to meet their original objectives ranges from 70% to 95%, with an average at 87.5%, according to Harvard Business Review.
Some of the key areas to focus on when developing an audit technology adoption strategy are:
The next-gen auditor has evolved and is one who creates value for their clients. They also become responsible for attracting, retaining, and training staff, remaining current with new technologies for better client engagement and reducing risk and fraud.
As the complexity of business, supply chains, market environments and economies increases, the question no longer remains whether the audit industry needs the power of next-gen tech. The question now is, how fast can we change and make this industry agile and more responsive to the forces of change and disruption?
CA Kiran Bafna is Managing Director–Asia & Emerging Market of Confirmation, part of Thomson Reuters. He is a Chartered Accountant from The Institute of Chartered Accountants of India.
© 2024 Institute of Singapore Chartered Accountants