By Rath Banham
According to a global survey of business leaders by KPMG and Forbes Insights, nearly all executives (98%) say their external audit firm uses advanced technology extensively.
There is no doubt that technology is transforming auditing, with technology solutions providing auditors with “deeper insight than they ever imagined”, says Christian Peo, national managing partner of audit quality and professional practice at KPMG. )express.
As KPMG CTO Lou Trebino discussed in a recent article on how technology is modernizing audits to provide insight, the overall theme of advanced technology is one big umbrella. For example, which technology is working in improving audit quality? In this regard, what can auditors gain from today’s broad range of solutions?
The following three areas can help answer these questions and reveal where technology can have a significant positive impact on audit quality.
1. Analyze the entire dataset and spot anomalies early
By using well-trained bots to execute rules-based business processes and identify data anomalies, auditors can identify deviations from an entire population of transactions—not just a representative sample.
“If a company has millions of revenue transactions…the audit team should step in and decide how risky the population is,” Peo explained. “Until recently, unless you went and looked at every single transaction, you had to make some generalizations about this population.”
With an automated process, each transaction can now be checked against predetermined criteria and flagged as outliers for human review.
Consider transactions that occur in a traditional order-to-cash process. If a manufacturer purchases significantly higher quantities of raw materials from a particular supplier in a particular region than is typical as historical data suggests, automated procedures may draw attention to the transaction as a higher risk and require further analysis.
“It tells you, ‘Here are some potentially risky trades,'” Peo said. “The auditors can then go in and investigate. They may find actual issues that need to be followed up and act accordingly, or they may realize that maybe they sea doctor Riskier, but all the evidence is actually appropriate – that’s exactly how some kind of transaction is recorded for this company. “
If this is the case — everything is on record — and the transaction does proceed as usual, the bot can incorporate this new evidence and update its criteria. Subsequent analyses will become more accurate based on these findings.
2. Improve the company’s own internal control
Auditors may take advanced technology for granted, but many of these tools—such as artificial intelligence (AI) and data visualization—are also finding ways for companies themselves. on which specific technologies will “dramatically change” auditing, face to the future Research conducted by KPMG and Forbes Insights found that most executives focus on artificial intelligence (61%) and intelligent analytics (50%). Many (48%) also expect robotic process automation to play an important role.
“Companies have to keep up with us, at least to some extent, and cannot rely solely on us to provide them with insight,” Peo said. “They need to understand how we use technology, incorporate technology into their financial internal controls, and start thinking about these same types of things.”
The benefits to customers quickly become clear. By maintaining a modern technology stack on par with auditors, clients can communicate with auditors more clearly, quickly and accurately during the audit process. They also have better control over internal analysis. After all, “you don’t want your auditor to know more than your SOX team or your internal auditor or manager,” Peo said.
This face to the future The study also noted that “most executives are confident in their own finance functions’ current and planned technology, but the majority (58%) also readily admit that their external auditors are adopting technology faster.” Clients may not Willingness to change their internal controls is understandable – especially when management believes they are already in a good position.
However, Peo warns, “If a company’s technology is far behind us, this has the potential to increase risk from an internal control standpoint. … There is a greater threat to auditors before management sees a problem, which may leading to the possibility of major defects or even major defects.”
3. Allow auditors to do more meaningful work
As financial technology continues to evolve, most executives understand the need and are eager to increase efficiency, increasing their adoption of automation technology.as described in ref face to the future study, “[Executives] Expect this technology to provide more accurate and reliable data; gain insight into their business; detect elevated risk factors; and help their finance department identify data outliers and anomalies — ideally in real-time. In addition, “the biggest benefits they expect from external auditors’ technology are greater visibility into risk and control weaknesses (90 percent) and KPI benchmarking across processes, business units, and industry peers (86 percent).” “
Peo has seen this firsthand, noting: “Automation gives us the opportunity to focus our efforts on really riskier transactions, helping to flag flags and identify risks. Data and analytics can help you understand what you should be reviewing trades. By looking at these trades in multiple ways, you can better understand what you are testing, where the risk is, and how much.”
Most agree that this improves audit quality (98%) by providing deeper insights into high-risk areas, providing better KPI benchmarks and increasing data coverage. Most executives also believe technology can enhance the customer experience (94%).
Also, when companies have more advanced systems, they are more likely to take advantage of the auditors’ own more advanced technology. In this regard, it is a symbiotic relationship. For example, if a company has a lean ERP system, auditors are better able to extract complete data sets from the company; data extraction can significantly improve process efficiency (besides the quality improvement that comes from analyzing the complete data set rather than a representative sample) .
“When a company does not have an effective quality management system, our ability to use technology as auditors can be significantly limited [being audited]Pio explained. “Having effective systems, especially in financial reporting, is not only important for gaining insights, but for making them useful. “
As auditing technology becomes more powerful and intelligent, the human touch will always be crucial because, according to face to the future Learning, in addition to basic accounting and financial skills, most executives believe that financial reporters must have their own skills.
What job skills do leaders of financial reporting teams value most?
80% Critical thinking, reasoning and problem solving
66% Investigative Financial Skills
66% are able to develop data analytics to achieve specific goals
57% Intuition about business strategy and strategic insights
“Those who are intellectually curious and able to draw insights from disparate pools of data will be the real standouts,” said Scott Flynn, vice-chair of audit at KPMG.
How can advanced technology improve your audit?
Ultimately, technology is a powerful enabler that can help auditors improve accuracy, completeness, and overall audit quality. Customers can also use these same techniques to improve their own processes.
Whether it is artificial intelligence, machine learning, data visualization or any other advanced technology, the most important factor is the process or technology and how auditors who are proficient in such advanced technology, critical thinking and analysis can significantly improve the audit quality and wider capital markets.
Rath Banham is a Pulitzer-nominated financial journalist and best-selling author.