If you type “What is the future of audit?” into Google (other search engines are available) there are a range of themes and opinions evident. One prediction is the break-up of the dominance held by the global audit firms leading to increased competitiveness. Another is the shifting of stakeholder expectations from the traditional mantra of auditors being “watchdogs and not bloodhounds” in the wake of numerous high-profile failures. There is also the concern that the audit process does not add value because it is too focused on the past.
One common theme within the articles and discussion papers written from a range of different sectors and perspectives, is that data analytics will play a key part in the future of the audit profession.
But is this really the “future” of audit? Some would argue that this is already the present.
There is no escaping the fact that we live in a data-driven, digital age, and the traditional audit processes of (showing my age here) so-called “ticking and bashing” are becoming a thing of the past. No more being armed with multi-coloured pens to annotate a vast array of symbols on a dot matrix printed purchase ledger report (now I’m really showing my age!).
Without going into too much technical detail on what a full audit involves, the testing work in most cases relies on samples of transactions, upon which the auditor can place reliance. If the sample is fine, then we can assume the same for the full range of transactions within the particular area being tested. Therefore the “ticking and bashing” work continues, as we “bash” trough the samples and “tick” off the transactions tested.
But what if we didn’t need to choose samples? What if your selected sample had missed a particular area of concern? Instead, what if we harnessed the power of the data through the use of new technologies and software to consider all of the data and not just a sample? As human beings, we couldn’t possibly work through that much data… but we could use the tools available to do the hard work for us, leaving us to interpret, analyse and comment accordingly upon the results.
Our audit processes integrate various data analytical techniques, from using simpler methods such as Excel pivot tables and analysis, to more advanced software systems to analyse and interpret much larger data sets, to assist our audit teams in preparing a more comprehensive audit approach.
This does not mean that all audits in the future will be prepared by robots (they have not taken over the world just yet), but it will allow the auditors time to consider a far wider range of data and consider a significant number of variables and outcomes in arriving at their conclusions.
The level of detail available, the number of possible items to report upon, and the possibility to report in real time as opposed to the past, means that the power of data analytic tools has far wider-reaching opportunities for adding value to customers than just for the purposes of the annual statutory audit.
We employ simple solutions such as the use of accounting software like Xero to automatically record and reconcile transactions without the need for manual entry. We also have larger scale projects such as creating user-friendly dashboard services for data intensive integrated ERP systems, allowing quick and easy access to a range of tailored reports. In short, we have put technology and data analytics at the forefront of everything we do and across our full range of sectors and service lines.
This helps to increase our overall level of quality, allows us to add value to our clients with real time solutions, and frees up the time of our teams to work on providing a first class service delivery rather than getting bogged down with time-consuming and labour-intensive processes.
Data analytics is indeed the future… but if it is not already part of your present, you risk being left behind.
If you would like to discuss this further, please contact Greg Stapley, Audit Senior Manager, or your usual AAB contact.
To find out more about our Audit & Assurance service, click here.