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Auditors: find out what these tech developments mean for you

Advancing technology is changing the way audits are done. Discover new tools and how they may help your job

A business person talks to a colleagueNew programming, such as automation through Excel, has the potential to impact services and day-to-day tasks (Getty Images/sanjeri)

Technology is changing many areas of accounting — and auditing is no different. New automated tools and techniques (ATT) are being increasingly introduced and relied upon by auditors.

“If you can reduce the amount of time spent ticking and tying, and redirect that work to value-add learning and services for the client, it becomes a win-win scenario,” says CPA Jeremy Beltgens, senior manager of assurance innovation at MNP. “And you can audit more effectively by redirecting those manual efforts into focusing on riskier areas of the audit.”

DEVELOPMENTS THAT MAKE AN IMPACT

To ensure auditors are able to capitalize on these advances while maintaining high-quality audits, the International Auditing and Assurance Standards Board (IAASB) has been examining technology’s effect on audit and assurance standards.

“We have seen the standards evolve such that they stimulate, or are more supportive of, the use of technology and automated tools,” says Beltgens.

For example, CAS 315 Identifying and Assessing the Risks of Material Misstatement was recently updated to include considerations for using ATTs as a risk assessment tool. The new application material outlines considerations for using ATT in risk assessment procedures, analytical procedures, and observation or inspection. Examples are included on using ATT to assist with understanding the entity’s information systems, including the flows of transactions and processing, journal entry testing, performing analytical procedures and identifying significant classes of transactions, account balances and disclosures.

“However, there is still a lot of leg work for firms to adopt a data-driven strategy when performing engagements,” says Beltgens. “Client data access is still a challenge for many firms, but this issue is slowly being resolved.”

To combat this, MNP built their own customized technology in-house, out of a desire to enable audit analytics across all assurance engagements. Designed to be used by the practitioner at the engagement level, the technology outputs a machine-readable, enriched GL file that is agnostic to analytic applications. Many other firms are also beginning to create their own self-made technologies to serve their own distinct purposes.

AVAILABLE TECHNOLOGIES IN AUDIT

When new ATT have been implemented, data sets can be better organized, as well as tested at much faster rates, which allows auditors to spend their time on analysis. Additional benefits such as increased client communication and organization are also being realized.

Program add-ons: Tools such as DataSnipper—an Excel add on—enable CPAs to scan documents and create quick links within Excel to support documents from PDFs and word processors, which enables working papers to be effectively merged, says CPA Paul Vetrone, director of audit transformation and innovation at BDO. This is especially useful for CPAs who are early in their careers and are often given the role of sifting through stacks of invoices for sample testing. With these new tools, he says, “We’re starting to see the first iterations of automating sample verification, which is pretty cool. A lot of firms have been starting to pick up on it — it’s exploded in popularity.”

Power BI, which allows auditors to build effective dashboards to analyze and visualize changes in data, has increased in use. “As we see more students come out of university programs with experience in Power BI, we’re finding more and more staff are able to try it out and utilize it more within their audit testing,” he says.

The cloud: Just as many industries are converting mainframe computers to the cloud, accounting is no different. “We’re seeing more clients transition to cloud-based accounting platforms,” says Vetrone. “I think that transition is going to be a big benefit.” For example, he says that for small- and medium-sized enterprises that are using programs such as QuickBooks and Xero, “we’re finding that it’s much easier for us to interact with clients, see and work with their data, and share information more seamlessly. Clients also see major benefits as cloud technology advances at a rapid pace. We are already seeing a number of these vendors utilize technology to automate daily activities such as recording transactions and reconciling differences. This in turn creates a digital trail for auditors that makes it easier to verify transactions during the audit.”

With new technology tools there is also the ability to use other firms’ experiences to enhance group learning. “An advantage of working with vendors that are developing the technologies is that you benefit from the wisdom of the crowd and the other firms that have employed their technology,” says Beltgens. Though, he cautions, this can sometimes lead to a loss of control in how technologies are updated. To avoid this, he recommends creating flexible frameworks that incorporate the technology into the firm’s processes. That way, should a firm and vendor diverge in strategy, the knowledge will remain inside the firm without losing the gains that have been made.

POSSIBLE PRECAUTIONS TO TAKE

With technology in ATT and audit developing so quickly, another consideration is how to implement these new changes within a firm. A complete overhaul will be difficult, Beltgens says. To ease the transition, he recommends building an understanding of the assessment process for adopting new technologies and implementing them beginning with the smallest changes.

“Without an effective change management strategy, you run the risk of having tools that go largely unused,” he adds.

UPSKILL TO STAY AHEAD

Experts recommend continuing professional development focused on available courses on technology tools.

“Self-education and experimentation with existing tools like Excel, will also go a long way in helping auditors develop their existing skillsets,” says Beltgens.

For CPAs who are used to continuing education, additional learning in ATT can be seen as just one more extension of their competencies. “We see this as essential tools, in order for them to complete a high-quality job,” Vetrone says. “Professional judgment is always going to have to be there with your CPA skills, abilities and training. Those are all essential parts of the job. These tech tools just become another item in their toolbox.”