Enhanced Technology in the Audit
In today’s business environment, where the quantity of data is increasing exponentially, advanced technologies are playing a greater role in corporate financial reporting and external audits. The audit profession must embrace digital tools such as workflow automation, robotics, and cognitive technologies in response to the coming avalanche of data.
At its core, the work of audit professionals is fundamentally about enabling trust in the capital markets. For the capital markets to operate effectively, there must be integrity and confidence in the financial reporting system. As companies automate more accounting functions and incorporate blockchain into business functions, and cybersecurity becomes more critical, auditors can instill trust, and confidence in the future by fundamentally changing the way audits are performed. New technologies are needed to audit blockchains and to quickly sift through volumes of fully automated transactional data.
Tomorrow’s auditors need skills in information technology, cybersecurity, and data and analytics, not just accounting
The rise of the humans
The journey toward building trusted, tech-savvy audit teams starts with finding the right people. While technology continues to disrupt all aspects of the business landscape, it is the people and their skills that make the difference. The profession must develop innovative ways to attract and retain exceptional talent that is diverse in thought and skills. Tomorrow’s auditors need skills in information technology, cybersecurity, and data and analytics, not just accounting.
Technology enables auditors
Advanced technologies make it possible for auditors to analyze larger volumes of both structured data, which exists neatly in rows and columns, and unstructured data such as e-mails, free-text documents, presentations, and web pages. The ability to blend and analyze both types of data enhances auditors’ ability to identify anomalies while providing deeper insights into risks, processes, and controls.
Technology provides an opportunity to automate how the profession gathers evidence to form an audit opinion. For example, data produced by automobiles may offer information on performance, maintenance requirements, and repairs that also may be analyzed to better assess the risk of a company’s warranty obligations.
Other examples include the following:
• Digital automation tools—including workflow automation, robotic process automation (RPA), and other data and analytics tools—can analyze up to 100 percent of data populations to facilitate more robust audit analysis. This may lead to the identification of outliers, allowing auditors to dig deeper into exceptions. The tools augment professional judgment and enhance decision-making. The ability to examine an entire population enhances an auditor’s ability to provide a more complete understanding of a client’s underlying processes and transaction flows, leading to a better risk assessment and a smoother audit planning phase.
• Cognitive technology enables the analysis of larger volumes of unstructured data. For example, it can be used to process lease documentation and extract relevant information to assist in assessing the classification, recognition, and measurement of leases. It also can be used to grade commercial loans by absorbing loan documentation to generate a grade, indicating the loan’s credit worthiness.
• Natural language processing, a form of cognitive technology that can read and analyze text or speech, is being used to mine information from e-mails and other documents. For example, natural language processing can pull mortgage information— property address, appraised value, sale price, and more— from appraisals, memos, e-mails, and other documents and put it neatly into a data table. This information can then be used by auditors as they analyze valuation considerations that impact loan grading.
A culture of continuous learning
Combining digital tools with the skills and knowledge of audit professionals can be the best approach to conducting an audit. Education and, indeed, the recruiting itself, has changed for the profession.
For instance, the KPMG Master of Accounting with Data and Analytics Program, which spans nine schools, has become a disrupter of the education experience for the accounting profession. One of the schools also offers a similar program in tax.
This program integrates accounting, auditing, and tax issues with the real-world application of technologies and advanced data and analytics capabilities. The goal is to develop future-ready accountants for an era of machine learning, artificial intelligence, and other technological advances. Students granted entry to the program receive job offers from KPMG upon graduation.
Advanced technological tools enable and empower professionals and enhance their skills. However, it is people who set companies apart and are fundamental to success.
Benefits of using enhanced technology in the audit
• Enhances audit quality
• Informs decision-making
• Generates richer, more detailed audit evidence
• Provides deeper insights into a company’s business and risks, processes, controls, and financial reporting outcomes
• Enables audits that account for a company’s changing circumstances
• Fosters a culture of innovation
• Facilitates continuous auditing