How technology is transforming the Audit
Not long ago, audits could be performed only by teams of accountants manually scouring reams of financial information. But given the explosion of data in today’s digital world, it’s critical that the audit profession evolves its traditional processes and embraces advanced technology tools—including robotics, automation and cognitive technology. By doing so, it can uncover insights that allow the audit to continue to be relevant and effective in helping investors make important financial decisions.
This new technology isn’t just changing financial reporting and auditing; it’s revolutionizing it.
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.
Not only that, but a cognitive system can learn as it goes along, allowing it to broaden and refine its knowledge and analytical capabilities, much like traditional audit professionals build their skills over their careers.
The result: Auditors can provide detailed, high-quality audits. And company executives and audit committees can get deeper insight into their organization like never before.
To take advantage of this sea change, auditors need more than just an understanding of accounting and auditing. They must have stronger analytical, data science and IT skills to complement their financial and business acumen.
As businesses grow and their operations become more complex, they typically modify or overhaul their IT systems to support and sustain every functional area. That means even more data is generated, and, in turn, much of it needs to be examined and analysed in an audit.
So audit firms have to make similar investments in people and technology to be able to dig deeper into the data and reveal more about a company’s business and its risks. Ultimately, these audit technologies will drive audit quality and provide insights to auditors and company stakeholders on a host of financial and operational matters.
For example, cognitive technology allows auditors to obtain and analyse information from nontraditional sources, including social media sites, TV, radio and the Internet, and determine if any of this external information may affect an audit either directly or indirectly.
It can then combine and process all of this information, together with the client’s own financial and other records. And through the use of advanced analytics, it can draw a deeper, more robust understanding of potential business risks.
The audit revolution is certainly being welcomed by many companies. KPMG’s 2016 CEO Outlook Survey found that 81 percent of CEOs are concerned that their organizations are not keeping up with new technologies. And a recent Forbes Insights survey showed that 58 percent think technology will have the biggest impact on audits over the next three to five years.
Even with all the benefits of cognitive technology, the human auditor still needs to make the critical decisions and offer key analysis and insights.
So businesses need to make sure their auditor is not only tech savvy but making the right investments in new technologies. Here are three questions they should be asking them:
- What is your firm’s perspective on how cognitive technology will impact the audit?
- What are your short- and long-term plans for investing in cognitive technology?
- What training has your firm undertaken to get your auditors up to speed on the application of cognitive technology in auditing (e.g., do any of them have backgrounds in data science or analysis)?