How to evolve audit while staying true to its purpose
28 January 2021: Top 10 audit and accountancy firm Azets is exploring how its audit service can evolve, from people skills to the role of analytics. Its national head of audit explains more as part of a series of articles on key themes from ICAEW’s Audit Manifesto.
Audit has come a long way over the past 30 years or so, says Azets’ national head of audit and regulatory compliance Carol Warburton. There’s more genuine assurance in audit now, she explains; audit in the past was much more formulaic.
“The approach is very much bespoke, looking at the specific risks of the business that we capture and address through a combination of traditional and modern methods.”
The way that the audit team takes a much more holistic approach now, speaking to stakeholders from across the entity. There are so many different business functions creating business risks that touch on the financial statements auditors provide assurance on. “The ability to actually have a sensible dialogue and give something back to the audited entity is far beyond anything that any of us could have hoped for.”
Technology is helping to move this further forward, providing access to more data from various sources to help with audits. This has accelerated during the pandemic. Azets increased its adoption of analytics in the audit process in response to issues that clients were having remote audits.
“We see an expectation that clients want a slightly less painful audit,” says Fraser Nicol, business technology consulting partner. “They’ve noticed certain issues more during lockdown, particularly around transferring data. Not all our clients are knocking on the door demanding analytics at this stage, but their expectations are changing. I don’t think the time when this becomes a standard expectation is far off.”
“We are trying to be able to facilitate and support a smoother process; to improve the quality of audit teams work by using analytics, or by using more technology-led ways to gain assurance from an audit opinion perspective,” adds Mitchell Collins, data analytics senior manager at Azets.
Another factor in the development of the audit service is the people skills; auditors are expected to be strong communicators in order to deal with the additional stakeholders. They also need to be flexible, and able to think on their feet.
Warburton recalls an audit which involved that combination of technology, communication and collaboration: the audit team thought it had spotted a fraud, so Collins and his analytics team were brought in to dig deeper into the indication in a way that wouldn’t have otherwise been possible. That gave Warburton the information she needed to have a conversation with the client with a breadth of understanding and insight that was essential. “You don't necessarily need that combined team on site, but it gives you the potential to provide a very different offering, depending on the audit risk or what we discover in the audit process.”
Azets is piloting three programmes to explore the potential of data and how it could apply to audit. It is trialling AI auditing platforms Mindbridge and Inflo and looking at the packages that clients are using. They are also developing an internal solution using Python.
“We're going to work with clients, run a one-year pilot project,” says Collins. “That will hopefully allow us to compare methodologies and technologies. Then we can determine what's going to be most effective, what's cost-effective and what works best for our clients.”
Warburton believes that we’ll see more exploration and collaboration from across the profession in the future, with initiatives such as Engine B laying a path for it. “There's going to be a move to much more cumulative gathering of evidence for an auditor, which would be far more efficient in terms of that final product and compilation of an audit file, but also very, very important for the audited entity.”
“Many of our clients are now on some kind of online accountancy solution, it is reasonable for them to expect us to be able to upload and analyse their data using our own audit tools,” adds Nicol. “Paper-based auditing is fairly unacceptable in this context.”
Azets is also pursuing training and upskilling for its audit team, including the ICAEW Data Analytics Certification. The crucial thing, says Nicol, is to keep the central tenets of audit at the centre of the service as it evolves.
“Independence and objectivity must remain central to what we do,” he says. “It’s important to remember that while it’s natural to want to impress the executive team at the organisation, we are auditing; our real clients are the shareholders. I would hate to see technology distracting auditors from their core role.
That said the audit profession must respond to the challenges and recommendations posed by the Brydon report, he argues. “Audits should become more informative, and address areas such as culture, environmental policy, and social and governance issues. This shift will be enabled by increased use of automation in the more traditional aspects of the audit, but also by the more intelligent use of capabilities, such as data analytics.”
Find out more about the ICAEW Data Analytics Certificate