Buying guide: innovation safeguards the auditing industry against coronavirus

Buying guide: innovation safeguards the auditing industry against coronavirus

Increasingly firms are leveraging both in-house and external auditing solutions, but implementation risks remain

Buying guide: innovation safeguards the auditing industry against coronavirus

Auditing technology implemented pre-coronavirus places firms in good stead to tackle challenges from the pandemic, market participants say.

“There has been minimal impact on our audit service delivery due to coronavirus because of our ability to transition practically overnight and with flawless efficiency due to the technology we implemented before the outbreak, which has allowed us to carry out remote auditing effectively,” says Louise Casey, head of audit at Mitchell Charlesworth.

“The feedback from clients has been positive too, with several of our clients working from home and preferring a remote audit regardless of the current situation, particularly those working in creative industries.”

Prior to the adoption of auditing technology, the process has been largely viewed as a compliance-based necessity for a lot of companies. But thanks to auditors and their clients adopting new technologies, companies are beginning to see greater value from the audit function, whether that be in terms of better process recommendations or simply providing more sophisticated data analytics.

But the pandemic has brought new difficulties.

“Remote auditing has been more challenging within companies where there is a large volume of transactions and often lots of different departments involved in the accounting function. Going forward, we will likely adopt a more hybrid approach that combines the best of both remote and face-to-face interactions as restrictions slowly begin to ease,” says Casey.

Prior to the outbreak, Mitchell Charlesworth had adopted video conferencing tools like Microsoft Teams and began rolling out an artificial intelligence (AI) powered auditing and accounting software called Inflo, which has played a vital role in allowing the firm to carry out operations remotely amid the coronavirus crisis. And while face-to-face interactions with clients certainly remain preferable to remote auditing, technology has helped the industry operate to a high standard despite the challenges posed by the pandemic and will likely accelerate the industry’s digital transformation.

Lightening the load

Mitchell Charlesworth is admittedly happy with its decision to adopt Inflo with the roll out of the technology just happening to coincide with the viral outbreak, making its adoption timelier than ever. But the firm’s digital transformation is far from over, with the company in talks with another third-party software provider to handle its audit confirmations which will take away a significant proportion of its administrative load and help ensure nothing gets missed during day-to-day activities.

For more than 90 years, paper-based confirmations were common throughout the auditing profession, though advancements in technology, business practices and industry rules and regulations have done away with this outdated, inefficient and unreliable method for contacting third parties.

“Technology is freeing auditors from more basic tasks,” says David Lyford-Smith, technical manager at the Institute of Chartered Accountants in England and Wales (ICAEW).

“Most of the things the industry is using auditing technology for tend not to be the most complex and tricky aspects of the process.”

“It is about automating some of the more time-consuming elements and trying to make them more efficient, giving auditors more time to dedicate resources to the more complex parts of the process,” he says.

Over the years, software vendors have become increasingly more sophisticated and have created innovative products and tools that have dramatically altered the way that auditing professionals carry out day-to-day functions. Among them are data visualisation tools like Oracle BI and Tableau.

But arguably one of the most advanced solutions in the market is Alteryx, a US-based software company that produces products used by auditors for data science and analytics. The software is designed to make advanced analytics and data manipulation accessible to any worker and is described as “Microsoft Excel on steroids” by Marc Bena, Partner, Risk Assurance at PwC.

Unsurprisingly, the big four firm not only uses Alteryx but has trained around half of its UK-based staff (around 20,000 employees) to use the data manipulation software.

“There has been a quantum leap in terms of technologies functionality over the last five years, particularly in the realm of remote working, but I would say that the difference between something like Alteryx and standard spreadsheets for example has been a real game-changer,” says Bena.

“We are training all our people on data analysis and visualisation technology. As a result, some of our teams who could spend a week trying to get hold of client data, reformat it and then it would crash because it’s too big, but now they can handle that entire process end-to-end in under ten minutes,” he says.

Big four opt for in-house solutions

Innovation in auditing technology among third-party vendors continues to flourish, but the big four started their digital journey long before many of these providers existed, with PwC, EY, Deloitte and KPMG systems a mix of their own in-house solutions and those offered by external software providers.

A brief look at any of the big four websites reveals a core suite of in-house auditing tools, with the firms leveraging their size and scale to build bespoke solutions that can provide a level of consistency throughout their respective organisations, as well as provide a competitive advantage.

At PwC, for example, the firm has created its own global enterprise resource planning (ERP) system called Aura which ensures quality and consistency through every stage of the audit. During planning, Aura plays a critical role in helping PwC identify risks, which drives the design of its audits, ensuring teams across its global network take a consistent, focused and efficient approach to audit risk.

Another core tool employed by the firm is called Connect, a collaborative workflow tool that allows for fast, and most importantly, secure information sharing of client data. PwC also has an award-winning data analytics tool designed to test data reliability named Halo. But more recently, the company has created a new in-house technology, GL.ai, which boasts an AI layer.

Innovation has its risk

Whether it be via investment in in-house technologies or working with third-party vendors, innovation is everywhere in the auditing space. But as new solutions continue to emerge that free auditors from the drudgery of many activities, it is crucial that the industry is mindful of the potential risks that emerging technologies like AI and machine learning pose.

According to a recent report by the ICAEW, automation also presents wider risks.

“For example, organisations need to consider how the skills they have affect the opportunity to automate – that is, whether they have and can keep hold of staff with the right skills to implement their automation projects.

“Conversely, automation can replace staff with valuable experience and knowledge that will not be fully replicated by the new automated process,” said the report.

Therefore, while new auditing tools and emerging technologies hold the key to evolving the audit function, strategic risks around their adoption remain and must be acknowledged to ensure the industry continues to develop systems that generate value for firms and their clients.

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