As technological advancements continue to occur rapidly, there is an urgent need for the Auditing profession to embrace it or risk falling behind. This applies to the wider ecosystem of not only auditors but also those responsible for audit regulation, standard setting, as well as the accounting profession at large. While technology is having a varying effect on the activities of these stakeholders, the opportunity exists for technology to elevate the quality of audits.
Against the backdrop of recent evolutions in technology, the concept of ‘what is an audit now?’ and ‘what will be the audit of the future? ought to be considered. Historically, information was stored on paper and an auditor would manually review a relatively small sample of that information to detect errors. However, data analytics is doing more than just changing the way an audit is executed. It intends to change what an audit of the future will look like. As clients adopt new technology they will be looking to wider assurance services to mitigate risks in their business, beyond the focus on historical information.
The evolution of tech has given audit practitioners leverage to have efficient services that sustain businesses. Data analytics has broken down volumes of data into simpler information that offers the best decisions and leaves a trivial error margin. Armed with information generated by the software, auditors can more effectively perform risk assessments, design more appropriate procedures, and investigate anomalies that might have gone undetected if the audit relied on sampling rather than a full analysis.
In a recent study, researchers have attested that there’s a lot of skepticism in regard to embracing new technology, which is a good thing. Auditors are very skeptical about software and whether technology is really going to do what it says it’s going to do. As such, technology adoption by audit and accountancy firms is still at a slow pace. This is due to the heavy assumed cost of acquiring the software, mindset change, complexity, and inadequate commitment from top management. Despite the challenges, a few domestic firms gained mastery and acquired general audit software such as CaseWare working papers, and e-audit while international firms that vie for specific audit experience and client-tailored results have managed to invest heavily into innovation to establish their software. Therefore, the recommendations below ought to be considered by domestic firms in a bid to fully embrace technology.
Think long term; When planning and budgeting for innovation, audit firms need to look beyond the current fiscal year by intentionally setting milestones of two to three years in advance so they can deploy innovation in their future engagements systematically like a road map. For successful implementation of technology and analytics, it is also important to have staff prepared to think differently about the audit than they did in the past. The assurance partners and other audit team members should undergo training on establishing a digital mindset.
Manage expectations about what audit can do; Auditors need to understand how technology works in order to give discernment of the results and be able to form opinions enhanced by technology. I feel, in my world, there’s more of an under-reliance on technology, meaning people are not using technology, or they adopt something, but they don’t fully integrate it into their audit processes. They don’t spend the time to really understand the capabilities of the software and how it changes what they’re doing
Think holistically about technological implementation; Another key consideration when adopting new tools is client compatibility. Some clients, for example, may still be using antiquated accounting ledger systems that are incompatible with new cloud-based systems. Understanding what your clients use and how compatible that is with what’s out there is something people should definitely consider before they adopt a new technology. Once a firm decides to implement a new tool, it must communicate any changes technology could have for employees, clients, vendors, and other stakeholders.
Allocate funds to technology advancement and reward innovation; Firms should create budget lines geared towards technology advancement and hire someone, or even nominate existing personnel, to serve as an “innovation champion
Given the speed of technological and digital advancements, it is imperative that those in the audit and finance profession invest in understanding and developing these technologies to benefit their respective sectors. It should be noted that adopting technology is no longer a choice but rather a necessity for auditors to thrive in this digital era. It’s crucial for auditors to embrace technology, leverage its opportunities, and address the challenges to ensure robust and effective audit assurance processes.
By Shamim Nantongo
