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To improve customer experience and boost revenues in the long-run. Not so long ago, audits were primarily performed manually by auditors. Digging financial information from volumes of paper was the norm. However, technological advances have changed the dynamics of the game and today auditing firms need to embrace the latest technology and tools including automation, artificial intelligence (AI) and robotics in order to stay competitive.
The findings of a recent Forbes Insights survey offer a glimpse of how technology is going to shape auditing in the coming days:
• 58% of respondents believed that technology will have the biggest impact on the audit profession in the next 3-5 years
• 80% of respondents said that auditors should use more sophisticated technology for gathering and analysing data for their day-to-day work
• By 2020, smart machines will feature among one of the top five investment priorities for more than 30% CFOs
The results of the surveys make it apparent that technology will have a big say in the way auditing firms do business. Let’s understand the importance of technology in an auditing firm.
Analysing large volumes of data quickly and precisely is one of the foremost challenges for auditors. A manual analysis takes a lot of time, with a greater chance of error. However, AI helps firms precisely analyse vast amounts of data at a much faster rate.
Cognitive technology—also known as artificial intelligence—can go through a vast amount of data faster and more precisely than any person. It can also determine where a company’s practices have gone or might go wrong. And it can point out where and how systems, operations, processes and controls can be improved.
A cognitive system learns as it goes along, allowing it to broaden and refine its knowledge and analytical capabilities, similar to how traditional audit professionals build their skills over the years.
For example, cognitive technology allows auditors to obtain and analyze information from nontraditional sources, including social media, TV, radio and the Internet, and determine if any of this information has the potential to affect an audit either directly or indirectly.
It can then combine and process this data with the client’s own financial and other records. Then by using advanced analytics, it can draw a deeper, more robust understanding of potential business risks.
In a profession that involves a lot of processes and critical data handling, the chances of errors can’t be nullified. These errors can have an enormous impact. In the US in 2013, businesses had to face IRS civil penalties of USD 7 billion due to incorrect reporting of business income and employment values.
Errors can also cost auditing firms dearly. The US Securities and Exchange Commission slapped a penalty of USD 6.2 million on one of the big four auditing giants for failing to properly audit financial statements of an oil and gas company. The firm’s audit team failed to spot double counting of certain fixed assets in the financial statements of the company.
Having proper accounting software helps improve the accuracy of your records. An incorrect computation early on in the process could snowball into having a significant impact on the end balance. However, accounting software is not immune to human errors which arise from data entry or interpretation mistakes.
A new discipline for auditors, data analytics helps auditors to improve the risk assessment process, test of controls, and substantive procedures. A survey conducted by business consultancy firm Protiviti, involving more than 900 internal audit professionals found 73% of companies performing analytics saying that the demand for data analytics has increased.
Combination of big data, visualisation tools, and advanced analytics give auditors useful insights that impact the way they plan, execute and deliver an audit.
Through data analytics techniques, auditing firms can analyse client data right from the beginning and identify the areas that need investigation. Thus, the problems are sorted as early as possible helping in enhancing the overall quality of audit.
The power of big data further enables auditors to correlate disparate data information to develop predictive indicators for better identification of higher risk areas, which in turn could lead to early fraud identification and operational risks. For example, firms can build predictive models to forecast financial distress and better assess the future financial viability of a company. They could also improve fraud detection by helping auditors assess the risk of fraud as part of their risk assessment.
CAs and auditors can make use of a Chartered Accountant Loan to leverage big data for their firm. With loans ranging from up to Rs.2 crore, affordable interest rate, no end restrictions on the use of the loan and doorstep services, these finance solutions are custom-made for professionals like you.
According to a report, brands lose up to 20% in revenues due to poor customer experience. A Capgemini study reveals that customers with strong brand attachment deliver 23% more profit than an average customer. In modern business, it's imperative for auditors to focus on customer experience. New-age customers want more than compliance work and after-the-fact reporting.
Cloud computing is a tool that has become a necessary business partner and strategy for successful audit firms. It facilitates comprehensive data storage, swift recovery and cost-effective management. Firms can take on more clients and broaden their reach in the market without having to assume security risks of doing so.
Cloud computing ensures that all stakeholders remain in contact, outside the firm’s walls, while still establishing and maintaining a secure environment. When mobility eases, a firm’s access is limitless.
Other areas where such technologies may introduce efficiencies include processing of confirmation responses or using drones for physical inventory observations. As a result, the auditor should have more time to carefully examine the more complex and higher risk areas that require increased auditor judgment and contain high levels of estimation uncertainty. Such tools will also enable auditors to perform advanced analytics which will provide them with greater awareness and deeper insights into the company's operations.
With rising expectations from clients and stakeholders and need for better transparency, auditing firms can no longer remain alien to modern technology. By leveraging the same, auditors can enhance the quality of audit and add to their own brand value.
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