The benefits and struggles of marrying audit with new tech

As is the story throughout the business world, emerging technologies are revolutionizing the way work gets done. These cutting-edge tools have the promise and potential to be a boon to audit firms looking to improve the quality and efficiency of their work, differentiate themselves in an ultra-competitive environment, and perhaps even insulate themselves from risk and liability. Among the technologies being adopted by audit firms are artificial intelligence, machine learning, robotic process automation, blockchain, cloud-based storage and services, advanced data analytics, and data visualization.

In broad strokes, these new technologies can automate and streamline the time-consuming rote tasks and data gathering needed to inform and empower more intellectual, human tasks as analysis, judgments, exercising professional skepticism, fraud detection, and risk assessments. Inexpensive data storage, melded with massive troves of “Big Data,” and parsed with increased computational power, can weave into the audit process to allow audit teams to parse and analyze far more information than they ever could before, improving audit quality in the process. The simple goal for all these complex tools: doing more, better and faster.

“As accounting and other routine tasks are automated, the CFO will create more meaningful and impactful roles for finance professionals, such as leading digitalization transformations, ensuring their organizations pivot wisely in this radically different marketplace,” is among the conclusions of a November 2018 report by Accenture, “The CFO Reimagined: From Driving Value to Building the Digital Enterprise.”

“When we look at some of the technology—data analytics capabilities and artificial intelligence—we now have the ability as auditors to pull insights out of the company’s information that really weren’t possible to do before in any efficient manner.” 

Trent Gazzaway, National Managing Partner, Grant Thornton

Dave Sullivan, national managing partner of the quality and professional practice at Deloitte, says firms are still assessing the many ways certain technologies can revolutionize the audit profession.

“I don’t think we understand what the potential is, for some of these things yet, as we continue to develop tools,” he says. “The audit profession is no different than any other business in America, in terms of trying to find ways to maximize the use of technology, especially for repetitive lower-value work. The audit will also always be staffed with professionals who need to make critical professional judgments. We don’t see technologies making those professional judgments, but they may help us exert skepticism and objectivity as we go through things and are able to look at larger data sets.”

One priority, Sullivan says, is creating better data sharing between his systems and client systems. “One of the issues, with respect to gathering data from our clients, is data wrangling—getting that data into our  system—which sounds kind of basic, but with all the different systems that are out there and that clients may have, it is an area where we see potential as we as we develop new tools.”

“There’s huge potential, and I think we’ll see a lot of change over the next five to 10 years, more change than we’ve seen in the last 30, but I don’t think we know yet exactly where all this is going to take us as we continue to experiment,” he adds.

“A lot of people may or may not realize that an audit process is very interactive,” says Jeff Burgess, Grant Thornton’s national managing partner of audit services. “It’s not a process where we just go and do a bunch of procedures in a dark room somewhere and report out to the client. The audit process requires a lot from the company’s finance team and others in the company. A lot of this technology can really help to reduce that time commitment that the company has to get through the audit and that’s extremely attractive to the audit committees and to management.”

To what extent is new technology having an immediate effect on accounting and auditing services?

“It is having a big and positive impact on the quality of the audit and of the value of the audit product for the marketplace,” says Trent Gazzaway, Grant Thornton’s national managing partner of quality and innovation for audit services.

“When we look at some of the technology—data analytics capabilities and artificial intelligence—we now have the ability as auditors to pull insights out of the company’s information that really weren’t possible to do before in any efficient manner.”

“We can highlight and identify potential anomalies that deserve audit attention,” he adds. “It gives us greater insight into the business itself and allows us to sit down with the company and talk in a greater level of detail about how their business actually functions. When you understand how a business is functioning, you’re automatically going to be a better auditor. The financial statements are really telling the story of the business. The technology we’ve been working on is going to deliver back to the companies that we audit greater insights into their business that maybe they couldn’t even pick up on their own.”

Audit committee scrutiny

“We think high-quality-focused, effective audit is aligned with the way the entity manages its own data and operations,” adds Brian Miller, national partner of transformation and innovation at BDO. “Audit committees and executive management expect auditors to keep pace with evolving technology and be prepared to leverage it to deliver the insights they expect from the capabilities and increased levels of data that are available … Some businesses already analyze their own data in a manner similar to auditors and cover some of the same ground. As business analysis becomes deeper, wider, more sophisticated, and more commonplace—with a focus on risk and performance—it seems likely they will align, at least in part, with the risks assessed by the external auditors.”

“Really good audit committees are focused on the quality of your management team and your financial reporting capability. They’re also looking at the evolving nature of the audit in terms of technology usage, adaptability, and use of data analytics,” says William Eisig, managing partner of BDO’s Atlantic region and national non-profit practice. “Audit has definitely become more specialized, more complicated, and more technology-driven. Audit committees have had to become more sophisticated over time.”

This sophistication also plays a role in how audit firms assure themselves, and clients, that a given technology is not just a “flavor of the month” and will actually yield results.

“The obvious objective of technology is to generate a more efficient and more effective process,” says Eisig. “It sounds simplistic, but it’s actually really hard. Making sure that we are utilizing new technologies for more efficient and effective audit results is really where we’re trying to laser-focus our efforts, whether that’s exploring a bit more around artificial intelligence and data analytics. The objective is always a more efficient process to get to those results.”