The future is now for audit

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With the fifth annual #AuditorProud Day upon us, one thing is clear: the pace of change within the accounting and auditing profession is growing exponentially, with an increased demand on the profession to keep up and meet evolving expectations by both staff and clients. Technology, in particular, is clearly driving changes in auditing, from the application of AI to scoping risks and checking transactions.

Over the past five years there has been an increased emphasis on data. Having a data-driven audit is paramount to driving efficiency, quality and client service. Technology will continue to reshape audit over the next five years by building on this data strategy.

Technology will be used to both tell a story with the data and remove manual, time-intensive tasks. How? The entire data population will be analyzed to identify anomalies and risk areas to facilitate a stronger audit plan, allowing the CPA to focus on the riskier areas and tailor the audit for each client. Data will be used to automatically perform procedures. Data will also be visualized — as a tool to help both the audit team and the client.

One important guiding principle to remember: technology must enhance professional judgement, but not replace it.

The role of the auditor

The auditor will continue to strengthen their position as the “trusted advisor.” It is really the true reason why a client will engage with a CPA — they want honesty, integrity, trust and respect. This will become more important than ever as the client will look to the CPA to understand how they can improve their business and make better decisions. It will become even more critical for an auditor to have access to data and use technology to have better visibility for their client and how they perform compared to their peers in the industry.

To best prepare themselves for future success, accountants need to explore three key areas: data, quality and client service.

1. Data. It is all about the data. The more comfortable the auditor is with obtaining and working with the data, the more enabled they will be to introduce efficiencies and improve quality. This is critical to remain profitable on their audit work and identify new opportunities for their clients by providing additional advisory services.

Technology is available today to help auditors work with the data. Consider Excel — an accountant’s best friend. For example, TeamMate Analytics from Wolters Kluwer works with Excel and allows auditors to easily perform hundreds of tests and visualizations.

2. Quality. Before a firm can move too fast into the future, they must be willing to take a closer look at their audit quality and strengthen their skills and tools to help them. The simple fact is this: it is only going to get harder to pass peer review and the American Institute of CPAs has already said that they are prioritizing strengthening this program. There were changes to the peer review in October 2018 — firms will be forced to comply and will have to take action. What worked last year will not necessarily work today — for all size firms. Using a disparate checklist approach is no longer going to work.

3. Client service. Another critical skill is the ability to build relationships and nurture those relationships. There are several things the auditor can do here:

  • PBC Lists: Auditors can help their client be ready for their audit and shift their perspective that the audit will be of value. For example, the CCH ProSystem fx Engagement solution from Wolters Kluwer has a new cloud-based PBC list called the “Engagement Organizer” to help the firm and the client keep better track of what is required and when.
  • Data capture: Use tools to capture data directly from the client. These tools have multiple benefits — it gives auditors a stronger understanding of the client early and gives them the data needed for analytics to increase quality and efficiency. Plus, it reduces the burden on the client, removing the need to ask for several pieces of information.
  • Visualization: Data by itself is hard to understand, but when presented visually, it is much easier to tell and understand the story. Visualized data can be used during the audit to strengthen the communications with the client, as well as augment the final audit report.

What’s keeping them up at night

Auditing firms are concerned about a few things:

  • Staying relevant;
  • Staying competitive; and,
  • Having the right tools to do their job.

Firms are most excited about how they can better serve their clients. How they can get away from manual work and instead work on using their professional judgment to make a real difference for their clients. For example, how can they help their client identify new revenue opportunities? Or find new ways to improve their profit margins in a certain line of business?

Here is what Andy Hines, audit manager for Texas-based Top 100 Firm Whitley Penn has to say: “In the accounting industry, we are seeing a race to the cheapest price — the commoditization of the audit process. We have to find new ways to add value for our clients. We need to create a more efficient audit through technology, so we can do more with less, resulting in a better price while adding more value. Bigger players are coming into the market and driving down the price for an audit, while the cost of service continues to increase. Realization gets squeezed.”

Hines believes emerging technologies, including predictive analytics and AI, will continue to improve Whitley Penn’s ability to leverage data for the benefit of clients — adding value through critical insights and consultation. “Over the next eight to 10 years, I see our audit process changing dramatically," he said. "It will become more data-driven, more analytics driven. There will likely be a decline in sampling and an increase in testing at a 100 percent level. We need partners that see the same change in the industry and are proactive about making the tools we need.”

For smaller firms with smaller budgets and limited resources that are looking to remain competitive with larger firms, they need to embrace a two-step process:

1. Become more efficient so that they can improve their margins and do more volume.
2. Create more time to focus on additional opportunities that are value add for clients.

The key to achieving this is to look for technology that will help remove manual work and enhance professional judgement. Look for technology that will identify actionable insights as part of an audit, as well as new service offerings.

Just as auditors need to commit to the technologies that are reshaping the audit, we at Wolters Kluwer are committed through our Integrated Audit Approach to enabling firms to elevate how they perform audits and to transform the services they’re offering, allowing them to succeed today and be ready for the future.

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