The external audit market is moving from reactive and forward-looking. Functionality to forward-looking and proactive functionality, enabled by effective use of technology. The transition has only just begun, and the way forward could dramatically change the face of auditing. The development of artificial intelligence, data analytics, Blockchain technology, cloud computing and cloud storage. It is having a significant impact on the audit industry. These developments require auditing firms to invest in technology and hire competent IT professionals.
Technological transformation began in the early 2000s when companies transformed their information into digital data. This was followed by automation and analytics, which continues to this day. Data analytics is the most mature technology currently used by audit firms.
Technological advances will not only revolutionise the way auditors work, but will also impact the business model of Top Audit Firms In Dubai themselves. Checkouts will no longer take as long as they used to, which could change the time-based payment model. The CFO’s role can become more strategic, as access to vast amounts of information and the ability to decipher it quickly will give them an extraordinary view of the organisation.
Technological developments impact the external audit industry
1. Big Data Analytics
Traditional audits only perform sample-based testing, as it takes a huge amount of time to review all the data involved in the audit. Today there is more data to analyse and more variables and outliers to identify. Traditional methods cannot keep up with data growth.
Data analytics allows auditors to analyse comprehensive data sets and visualise the results graphically. Finding anomalies in data is easier than ever. Auditors can use data analysis tools in the testing and control of risk analysis and analytical processes to make judgments and provide insights. However, the UK’s Financial Reporting Council (FRC) has found that the data analytics used in the audit is not as advanced as expected in the market.
Data analysis requires large-scale and long-term investment of auditors. While there are third-party vendors that may be involved in data analysis, most companies choose to create their own platforms. While these companies have yet to achieve the efficiency required by such projects, that will change over time as auditors, regulators, and standard-setters figure out how to end this. incorporate new technologies into the regulatory infrastructure.
2. Artificial Intelligence
Artificial Intelligence (AI) is no longer a theory. Many best audit firms in Dubai have begun to invest in AI to automate many tasks that were previously performed manually. AI helps to understand the entire ledger and identify anomalies based on risk rather than rule. This makes it easier to report unusual payments or activity that would normally go undetected by traditional testing methods. AI-based systems can continuously learn and adapt to data, while reducing the workload for businesses and customers. AI will not replace the human workforce; instead, it will work together with people, automating complex and big data tasks and facilitating decision making.
AI technology itself is not proprietary, so it is not necessarily only large companies that provide audit solutions using this technology. Garbelman Winslow CPA, a professional tax and accounting firm, is a perfect example. The company, which has a total of 6 CPAs and 15 employees, uses artificial intelligence as part of its audit process to identify risky transactions. The AI-powered platform analyses
general ledger transactions and classifies them as high risk, medium risk or low risk.
Deloitte recently acquired Magnetic Media Online Inc.’s artificial intelligence platform business, signaling the strategic importance of investing in AI.
3. Automate processes with robots
Robotic process automation (RPA) is different from artificial intelligence because RPA cannot learn data patterns and make judgments. RPA is commonly used by audit firms to gather audit evidence when data resides in various non-integrated organisational systems. Areas like reconciliation, test confirmation, email generation, etc. can be supported using RPA. RPA is a bit expensive to implement, but can have financial and non-financial benefits.
According to the RPA implementation roadmap proposed by K. Moffit, A. M. Rozario and M.A. Vasarhelyi, has three main stages:
This involves identifying audit processes where RPA can add value. One of the factors that can be taken into account to justify automation is the number of repetitions of the task. Once the audit processes have been defined, they must be broken down into small audit modules so that the software can interpret them.
Standardization of audit data:
Audit-related data may come from different sources and therefore the nomenclature may vary. As such, the audit data must be normalized for the software to perform the process.
Run RPA-based audit tests:
The final step is to program the software to automatically run the assessment tests.
Distributed Ledger Technology
Distributed ledger technology (DLT) encompasses a group of technologies, including blockchain technology. Blockchain technology eliminates multiple databases and provides global accounting services. Immutability is a key principle of DLT, which means that writes that have been performed cannot be changed but can be fixed by a balanced write operation.
Technological benefits of using DLT in the audit process
- Customer privacy is maintained through encrypted communication.
- DLT eliminates the need for a central trusted third party
- compared to Database Information is fraud proof because entries cannot be changed once done.
Cloud technology is widely used by organisations. The biggest advantage of a cloud system is that employees can view files from anywhere in the world, as long as they have an internet connection. Cloud technology is also inexpensive to implement. The benefit for auditors is that organisations will have a single source of data to refer to, which will help avoid confusion and eliminate errors.
However, using cloud technology comes with cybersecurity risks. Since data is inherently highly secure, the risk is high and therefore cloud technology should be chosen when considering the risk mitigation strategies offered by the cloud provider.
The power of emerging technologies like AI, cloud accounting, distributed ledger technology, robotic process automation, and more. indicates that future audits will be based on more detailed and complex data analysis. As such, auditors will be able to provide richer information, more detailed audit evidence, and strategic opinions based on their analysis.
With advances in technology, redundant tasks will be eliminated. As a result, there may be a reduction in office staffing; however, human intervention will still be required as the need for human monitoring increases with technology. The fundamentals of auditing will not change, as human judgement and professional scepticism are still required. Simple technology enables auditors to obtain the required audit evidence easier, faster, more accurately, and more broadly than ever before.