The Role of Technology in the Future of Audit

The recent lockdown has made us realized the importance of the use of technology in the auditing profession. Physical movement restrictions have forced the auditors to change their audit approach and work remotely upon relying heavily on technology use. This will change the future of auditing system. 

The technology is rapidly evolving and is already being applied in a myriad of emerging sectors like driverless cars, block chain technology, space exploration, financial services, investment portfolio management, and many more.

As the world of auditing and accounting constantly evolves, what makes the coming decade of technological advancement interesting is that auditing has already begun its gradual shift towards a sustainable, almost paperless procedure and with the advances in artificial intelligence, the future of auditing will be affected. 

Revolutionizing the world of auditing through automation

The technology such as Artificial Intelligence, Machine Learning, Automation and Programming has come to define the way the world works. It is already reshaping the auditing and accounting industry and augmenting human resources by:

1.  Processing large amounts of client data and driving insights to understand consumer behavior, market trends, and anomalies.
2. Especially in auditing, automation is starting to play a crucial role by delivering high-tech and progressive tools for understanding ledgers, reporting risk profiles for the client, and diagnosing potential frauds.

The impact of technology on Auditing and Auditors

As the world becomes increasingly technology reliant and the impact of it on auditing profession will be unprecedented. Some of the examples are:

• The tools help auditors to effectively utilize features like machine learning, neural networks, and language technology to eliminate a lot of the manual process and make auditing a faster, richer, and increasingly automated process.
• Through artificial intelligence, the identification of aberrations becomes faster. It utilizes a number of connected technologies like data mining, machine learning, and speech recognition to provide results to auditors.
• Many tasks like ingesting, typing, and analyzing data that were previously performed by auditors manually are now being automated.
• Artificial intelligence processes in the auditing systems eliminates the need to create tests, write scripts, or remember all the functions and rules, help in identifying anomalies and understanding the ledger in less time. This increases the chances of assurance and reduces the chances of malpractices.
• The technology plays a watchdog and keeps an eye on fraudulent transactions or illicit activities, which can lead to money laundering, market manipulation, or bank fraud. The systems can flag these to human auditors and bring it to their notice.

How the technology is reshaping auditing

The technology allows humans to automatically program and code accounting entries into the system. This reduces the mundane work for human resources and allows them to spend more time on productive activities and critical thinking. So, by creating a sophisticated machine learning-based model, auditors can program the software to look at fraud accounts, high-risk profiles, and anomalies in transactions.

Another example of how artificial intelligence is redefining auditing is in CONTRACT REVIEW.

Machine learning tools allow human resources to analyze, interpret and review large sets of data and contracts such as leases in a much shorter time than it is possible to do in a conventional method of contract review. A study recently outlined that AI tools programmed for contract review were able to accurately analyze and extract information from lease contracts by up to 90% accuracy. They were able to do this with pre-selected criteria in the vast majority of cases and achieved a higher level of precision than it is possible to the average human reviewer.

By making it possible for auditors to work smarter and better, the use of tools helps auditors to optimize their time, effort, and productivity to shift their focus to a broader, deeper, and analytical role. Not only that, but it also enables them to ask better questions to their organizations, audit board, and CFOs which adds considerable value to the auditing process.

Risks associated with use of technology

The use of technology in the field of auditing and accounting is in the early stages of development. One side the adoption of fully automated technologies is set to completely revolutionize the way auditing functions work and provides many benefits (e.g. less human intervention in auditing process, shortened time on decision making and quick processing of large & complex data), on other side there are also few risks which are associated with it which require our attention and needs to be properly addressed:

• Increased loss of jobs with the rapid adoption of technologies and automation of processes.
• The information rests on a cloud platform and can be exploited for destructive purposes, personal agendas and selling information.
• High implementation and maintenance cost which can slows down its adoption.
• Inability to think like a creative human; might raise the risk of removing the critical eye of an auditor.

The Future ahead

The technology augments human auditors and this relationship is set to redefine the standards of the auditing process in the coming years. Technology and auditing are two sides of the same coin and their collaboration is already shaping global strategies. The simple truth is that the adoption of technology with auditors will not spell the end of traditional accounting but redefine the new beginning.

The strategies and quality of audit provided through automation have made it an indispensable part of large auditing firms and even clients want to work with firms who have use of advance technology in their system.

As we speak, the automation is already improving the quality of engagements and delivering a greater level of insights for many firms across the world.