How Audit Has Changed Because of the Pandemic
In the wake of the global pandemic, the way auditors work has seen the largest overhaul many professionals will experience in their lifetime, greatly impacting the future of audit. The audit process has evolved to meet the limitations imposed on firms via travel restrictions and inaccessible documentation.
Before the first shutdowns in 2020, many firms (large and small) were undergoing a digital transformation. Since then, necessity has forced the hand of every firm as the economy and the way we all work came to a screeching halt. Barriers that stalled technology adoptions in the past, like client resistance or firm readiness, vanished as digital options became the only option.
According to the ISACA, with the digital transformation brought on by Covid, “audit is transitioning from a reactive, backward-looking activity to a proactive, predictive, forward-looking one that operates in real time.”
This shift in firms comes with a shift in auditors themselves. This article will explore the ways Covid ignited a digital transformation in auditing organizations and what skills auditors should seek out to thrive in the new auditing landscape.
Digital Transformation in Auditing Organizations
Regardless of whether they were ready, willing, or able, Covid-19 forced accounting firms to adopt remote operations and embrace digital technology, significantly accelerating virtual audit capabilities. The extent of that digital embrace will be key for firms in the future as digital tools and data play an increasingly important role.
New technologies enable firms to work with big data and perform higher quality, more efficient, and better-focused audits. While remote audits may have started as a necessity, technology like remote data extraction is not going anywhere. As KPMG Canada observed, “the future of audit isn’t just about remote audits; it’s about transforming underlying processes using technology to achieve three objectives: a higher quality audit, a more efficient audit and better business insights for our clients through the traditional audit process.”
Tools like Strongbox, which let auditors extract enhanced data directly from a business’ accounting software, have enabled firms to improve efficiency and reduce time spent hunting down needed documentation. Clean data in the right format is essential, and cloud-based tools with remote data-extraction capabilities deliver that clean data to auditing professionals in seconds. The need for these benefits won’t disappear as offices reopen, rather, the efficiencies gained from these technologies will only increase the demand for this technology from both clients and employees.
For example, being able to extract all financial data at once has greatly reduced (in some instances, even eliminated) the need for things like assumed error rate. When only gaining access to reports or partial data, auditors were forced to use a statistical sample approach. However, having access to every single transaction, auditors can run more advanced analytics and queries to enhance their procedures.
Machine-learning technology also accelerated during the pandemic. With automation and artificial intelligence from Strongbox, auditors can now review 100% of a client’s transactions rather than relying on a statistical sampling. With the power of machine learning and AI, this massive data set can be combed through by smart technology to uncover risky transactions or red flags that would have been nearly impossible to catch manually. The result is a higher-quality and more efficient audit of financial statements where auditing professionals can instead spend their time investigating uncovered anomalies and where clients can get actionable insights faster.
The Effect on Auditing Professionals
Digital tools are only as good as the auditor using them. Advanced technology can do quite a bit with the data, but ultimately all that processing and analysis is at the service of the auditor – the final decision-maker and interpreter of the information.
Auditing professionals already have a very specialized, precise skill set, but in order to fully take advantage of the digital transformation, firms will need to start hiring for a more diverse set of competencies. EY predicts that “audit firms will require more people with significant expertise in STEM (science, technology, engineering and mathematics) to enable them to leverage technology effectively for audit purposes.”
Additionally, fast-developing environments like the one forced by Covid require an agile mindset. Auditors will need to nurture their curiosity and embrace disruption to stay at the top of their field. Clients will come to expect the enhanced insights technology can bring, and these expectations are only going to evolve as fast as the technology. In addition to the ongoing professional development requirements that audit professionals undergo, staying abreast of the latest technology is quickly becoming just as vital.
With real-time data at their fingertips and contextual insights from procedures, auditing professionals may find themselves playing more of a financial analyst role than they have in the past. The ISACA has identified these additional skills that auditors will need:
Ability to plan and execute, keeping the big picture in mind
Ability to integrate adaptability into the audit design
Ability to increase focus on key risk areas to improve assurance
Ability to use process mining to analyze data
While it’s impossible to know just how much the auditor’s role will evolve in the future, now is the time to start evaluating your own firm’s technology adoptions and how your team is adapting their skill set to take full advantage of these solutions for your clients.
The Future of Audit
Clients are seeing the benefits of the digital transformation brought on by Covid. More accurate audits with real-time data are giving them the power to address issues before they become a year-old problem. Even as in-person audits resume, the technological advances accelerated by the pandemic are here to stay. Contact us today to see how Strongbox can help your firm with its own digital transformation.