If you are like most people, when you begin to think about changes that are made to a financial statement audit, chances are you are thinking “big.” For example, during the time directly after the stock market crash (which took place in 1929), changes came fast. This is when the modern era of the independent audit for financial statements was created, which is now a key to the public’s confidence in the global markets.
Since then, the concept of the audit has continued to evolve, adapting to the tech-forward computer age, and in more recent years, there has been a rise in the realm of data analytics – all along the way, CPAs have played and are going to continue playing a huge role in the bigger process. The digitization and automation of business information are working to reshape finance function, which is altering the way people, their clients, and employers approach work.
The pace of this change is something that is unprecedented. In fact, it’s estimated by McKinsey Global Institute that 49 percent of all work activities may be automated now, using the technology that is currently in place. Additionally, Deloitte, the Big Four firm, is projecting that robotics may automate up to 40 percent of all basic accounting work by the year 2020. For some companies, it isn’t unheard of to envision a future audit system that’s completely automated, unsupervised, and untouched by human hands.
There are others still, however, who don’t agree. The technological advancements in place provide the tools needed to continually improve the effectiveness and efficiency of audits in a business environment that is getting more complex by the day; however, there’s still a need for professional evaluation, skepticism, and judgment, which is something auditors bring to the table.
According to experts, the changes occurring to the financial statement audit will be shaped by several factors, which are found here.
In the connected world that is present today, historical reporting is not as relevant as real-time reporting is. With the use of the cloud, data analytics, and automation growing, technology is already causing companies to move toward greater timeliness in the realm of financial reporting. The last stage, which is continuous monitoring and assurance, is going to benefit the public, by requiring more innovation to be successful.
A promising up-and-coming technology is blockchain, which is a distributed, digital ledge that is able to record transactions over an established peer-to-peer network. There are still many questions that remain, regarding how this is going to work in the future, and the relationship it has with the modern audit.
With the use of audit data analytics increasing, it has the ability to transform financial statement audits and is going to be a key element in the data-driven, transformative audit methodology that is going to underpin an all-new and dynamic auditing solution.
Greater audit insights will be provided by analyzing both the structured and the unstructured data, and the practical analyzing of whole populations of data, rather than sampling. Leading CPA firms are focused partly on developing techniques that will identify any outliers in larger pools of data that are likely to hold material misstatements. More refinements are coming to these approaches in the future, too.
There’s now a priority put on standard-setting projects, according to the Auditing Standards Board, with a focus toward technology, as well as evolving practice that begins with the standard on the audit evidence. In addition to this work, the ASB will be addressing the auditing risk assessment, estimates, quality control, professional skepticism, and data analytics. If no changes are made to these standards, then innovative audit methodologies are going to be hard to develop and to execute.
With practices continuing to evolve, it’s important for auditors to be able to draw on a much broader range of skill sets, from analytics to data science and even information technology. The increase in demand for a new assurance service lines, such as the SOC for cybersecurity purposes, demands expanded competencies. This means that companies and firms will be continually seeking talent that is digitally proficient and open to taking on new assurance responsibilities, all while maintaining a focus on quality and trust. It’s up to the professionals hired to work with the available information to ensure they can fill these expanding roles.
Technology is definitely a significant factor behind the audit process of the future; however, it’s still time to make progress on the standards, methodology, and skill development if anyone is going to realize the potential that it actually offers. There’s no question that it is an extremely exciting time for this profession and one that requires care, focus, and a sense of urgency.
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