One silver lining of the pandemic for the auditing profession is the speed with which auditors embraced new digital technologies to remotely audit their clients. Pre-COVID-19, adoption had been slow. Today, it would be difficult to find an audit firm that hasn’t switched to using some form of analytics.
Large audit firms have been using technologies such as robotic process automation (RPA) and data analytics for a number of years, but data analysts managed the tools while auditors continued to carry out the traditional audit work. Today, that’s beginning to change.
The skills and make-up of audit teams, already changing before the pandemic, have evolved, too. Teams now consist of almost as many data analysts and digital specialists as auditors. Some audit firms are now training their entire workforces in how to use tools such as data analytics.
Ian Pay, Head of Data Analytics and Tech, ICAEW, says: “There’s a democratisation process going on. It's not just the preserve of the data specialists – everyone has access to tools that can be used to do some pretty powerful stuff. You still have data specialists to do the very complex tasks, but that accessibility reaches down right across the spectrum now.”
Other drivers that have accelerated digital adoption among audit firms include the explosion of new software vendors, tighter regulation, increased focus on audit quality and client requirements.
Pay says: “It’s changed for a number of reasons. The technology has evolved, but there's also much more emphasis on the role of technology in audit. Audit standards have been tightened up and there is a greater need for auditors to engage with technology as part of the process.”
Expensive artificial intelligence, robotic process automation and analytics tools are no longer the preserve of large firms. Vendors are developing tools – increasingly in conjunction with audit firms – that very specifically support the audit process, making technology more available to those firms that don't have the budget or resources to develop it in-house. Now, they can buy the technology giving them almost instant access to some powerful analytics.
“Auditors want to be engaged in more cutting-edge technology and be more empowered to do some of the work themselves and ask the deeper questions,” Pay says.
John Toon is Senior Audit Manager and Tech Strategy Lead at top 60 firm Beevers and Struthers, which earns about 60% of its income from audit, two-thirds of which from the not-for-profit sector, including schools, colleges, housing associations and charities. He says another driver in swifter adoption of audit technology in firms is the “ability to request information from clients through some kind of portal, allowing firms to ingest it into an audit file in a structured manner”.
“That really exploded during COVID-19. It’s been a huge area of opportunity for providers in that market and essential in terms of being able to share things securely and also monitor progress.”
Franki Hackett, Head of Audit and Ethics at Engine B, says that her organisation, which focuses on data ingestion, has also seen many firms adopt data analytics tools, either by building them or buying them. The greater challenge though, she says, is data ingestion. Firms are now embarking on proper transformation programmes to change the way they get information from their clients, how they ingest that data and where they store it.
She says: “There was a real recognition by firms that perhaps were a little bit slower off the starting mark that they needed to begin digitising because of the pandemic – also because the firms that moved faster are now starting to gain the benefits of using analytics.”
The classic approach to data analytics on an audit is journals testing. In recent years, that has been the main focus of the top 10-20 firms, due to the consistency of the testing requirements on every audit. But Pay says the time is ripe for an exploration of other areas to deliver a technology-enabled approach. Subledger testing around sales and expenses processes, for example, is the next big opportunity.
Firms should also consider what they already have at their disposal, such as Microsoft 365 licence agreements, which include tools such as Power BI that allow firms to do visualisations.
Hackett says: “Tech is like any other tool. If you’ve got a decent strategy and you know where you would like to go, tech can talk to you about the art of the possible and how you get there. But it shouldn't be the be all and end all.”
For a profession that was losing talent, the innovative technologies available in the new audit landscape could halt that brain drain. Not only do they allow entire firms to become more efficient, but they also improve the quality of work for auditors.
In fact, experts say anecdotally that newly qualified auditors with data analytics knowledge won’t stick around for long at firms that aren’t embracing audit technology. The future looks bright for audit, but there is still much work to be done to benefit from those considerable opportunities.
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