Impact of technology on Audit

The world is fast moving towards the high advancements in the space of technology and the businesses world has evolved to take the advantage of this change. Technologies like Robotics and Process Automation (RPA), Artificial Intelligence (AI), Machine Learning (ML), Deep learning (DL) etc. has started to make inroads in most of the top organizations.  And this of course has a direct impact on the way these companies need to be audited.

Like in most of the cases the technology is definitely helping the audit field by improving the quality as well as the efficiency. However one cannot completely ignore that these technological changes brings with it their own set of new ethical and moral challenges.

So with the changes that are being adapted by the companies today, it has resulted in rapid increase in volumes of data processed, changes in the business models, requirements of the customers and suppliers alike and resultant changes in the audit methodology. As per research conducted by CA ANZ in association with ACCA, the report mentioned that the most commonly used technology today is the data analytics. This obviously is no surprise as the companies today are processing data like never before. Its commonly said the data is the new oil of today’s economy, hence to leverage from that, the companies are processing high amounts of data due to which the auditors too require to audit such high levels of data.

Similarly the business models are changing from the traditional brick and mortar companies to online shops or aggregator businesses. The companies no longer have businesses where the sales are predictable, a simple viral video can mean the business can see unimaginable growth, or a single bad review on famous websites can turn the business upside down. Therefore the auditors need to understand how they are going to work with such business risks eventually impacting the audit risks. Dimitris Sourbis, Assurance Partner at PWC quoted “Understanding how technologies such as Blockchain and Machine Learning work is necessary to enable auditors to assess and respond to the current and prospective risks of the organisations that place their trust in us”.

Additionally the RPA has changed the way the businesses were processing the transactions earlier. Most of the companies today use Robots or software’s that replace humans doing repetitive work. This definitely helps improving the quality and efficiency however how the auditors can know for sure that the machines are doing their job correctly. The auditors erstwhile could use procedures like enquiring the staff accountants, or observe the process of billing etc. however today these processes have become automated to an extent that at a touch of button millions of transactions can be processed simultaneously.

So what can the auditors do? Well, use the technology to fight technology. Machine learning can be one of the things that can be used to help identify specific types of risks using supervised learning algorithms, this can help identify areas where the auditor would need to be more careful may use the outcomes to plan their audit better.

Similarly lot of audit firms especially the BIG 4’s have started to use technologies like CAAT’s (Computed Assisted Audit Techniques) that makes the process of audit a lot smoother. This can be validation of documents, testing of controls, etc. The CAAT’s would be highly helpful in putting the documents together ensuring that the most painful exercise of putting the audit file together becomes less tedious.

The technology is here to stay and will only evolve further. The auditors will need to ensure that they stay ahead of the technology and like mentioned earlier use tech to fight tech and make better use of the tech so that the output improves. The auditors need to make their reports more proactive rather than reactive, this can definitely add a great value to the industry today.

About Author

Zaheer Sayed, is one of the oldest ACCA members in India having passed out ACCA exams in December 2007 from London. Has vast work experience of over 14 years, having worked with Ernst and Young in Stat Audits to working as Associate Director at the UBS Bank, has in-depth knowledge of finance and accounting world. On academics side, has been teaching for almost 10 years, with ACCA teaching experience of over 6 years specialising in Reporting, Tax and Audits. Has also co-authored over 20 titles for a leading publication house in Pune on varied topics like Economics, Audit, Accounting, etc.