The
spaceship of an auditor from Earth landed on the green field of the planet
Kepler-3571c. The auditor had a task to participate in a stock take of flying
horses herd.
This
is not another story from Airstrip One rubric. The purpose of this article is
to discuss future application of technology in audit, but not as far as in the
above introduction.
Survey
The
reason for this post was the report “Audit 2020: A Focus on Change” issued by
Forbes and KPMG on changes required in in audit services and profession [1]. The
reports identifies number of directions in which audit should evolve:
technology, culture and regulations, skills, quality and nature of services.
Technology
captured might interest. 58% of respondents say that technology has the biggest
impact on audit profession according to report. The technology implementation
as mentioned in report is expected to impact audit process in following ways (top
three are mentioned):
- Provide tools for more sophisticated analysis;
- Provide more efficiency;
- Flag issues that require deeper investigation.
The
Big 4 audit firms have already taken measures to address challenges of new IT
era. All big audit firms have own departments specialising on IT audit and data
analysis. The expansions into the IT and related areas is not only organic, but
also by means of acquisitions: KPMG purchased innovative HR firm [2], EY
purchased a digital design consultancy [3] in 2015; PwC purchased IT consulting
firm earlier in 2012 [4].
Nowadays
it is common for auditors to use data analysis software to perform journal
entries testing. This is because the complex software is needed to analyse
large missives of journal entries downloaded from client’s accounting system.
CAAT (Computer assisted audit technique) has become a buzz word in audit text
books and instructions.
Auditor’s Future
I
think it is time for another step forward in the area IT implementation. Audit
firms should consider in which audit procedures audit software might totally
replace human auditors. There are some shy thoughts regarding this idea in the
report discussing that “audit should become continuous and ongoing to provide
real-time analysis” [1]. The way this could be realised is by deploying into client
IT system the independent software with the rights of ongoing check what has
been entered into the system and do checks following algorithm written my
human.
Potentially
some procedures could be performed by robot-auditor even with current level of
IT development in the world. For example, the procedure of invoice vouching could
be done by robot. Robot might have questions and at this point human auditor might
interfere.
The replacement of human auditors by robots should be discussed openly to develop new skills required for future audit profession. A report by Deloitte with the University of Oxford predicts that the robot revolution will displace almost 35% of UK jobs [5] and the audit profession should be ready for these changes.
The replacement of human auditors by robots should be discussed openly to develop new skills required for future audit profession. A report by Deloitte with the University of Oxford predicts that the robot revolution will displace almost 35% of UK jobs [5] and the audit profession should be ready for these changes.
Sources:
PS. See my previous articles on changes in audit profession:
