Search

In audit, new tools are easing a difficult task - Accounting Today

simpanta.blogspot.com

Auditing is, at best, a cumbersome and time-consuming engagement. Whether it’s an audit of internal controls, or one to produce audited financial statements, there’s always a fairly complex and time- and labor-intensive effort required.

Tools to assist in this task have been available for years, and as technology improves, so do the tools. Progress in this area has been particularly fruitful in recent years, going deeply into workflow, analysis, data mining, and machine learning and artificial intelligence. To get a better idea of where the tools have improved and what new capabilities they offer, we asked a virtual panel of vendors of audit-oriented software to bring us up to speed.

Put away the old spreadsheet

For many years, the go-to tool when performing an audit was the venerable spreadsheet. There are still a huge number of practices where the spreadsheet is the primary tool for tracking projects, defining workflows, and recording results, and they are still being used by some to perform statistical analysis and produce sampling lists.

That’s pretty sad when you think about it, as spreadsheets were initially introduced in the early 1980s. Spreadsheets have evolved since then, and Excel and similar spreadsheets do have enormous and impressive capabilities. But they weren’t developed to specifically address the process of auditing. The fact that practices are still using them for this purpose can largely be attributed to inertia and familiarity with the software.

Fortunately, software vendors largely see a sea change in the works, with more and more accountants seeing the large benefits in productivity and accuracy that the ongoing evolution of auditing tools provide. These tools encompass advanced capabilities in areas including data mining, analysis and reporting.

Robin Grosset, chief technology officer at MindBridge, said, “I see a lot of positive movement in recent years in the accounting and auditing profession to acquire the skills and technology to go deeper into analyzing and understanding financial data. There’s been a steady uptick in accountants and auditors upskilling to take advantage of available tools. Globally, universities are adding in new tools, including coding, as part of their accounting programs, and firms are rolling out digital universities to jumpstart their existing auditors on this journey, especially as the CPA exam in the U.S. is being updated to include more data analytics skills. It appears the tide has turned and we are seeing rapid uptake of advanced analytics in both training and tooling.”

Grosset continued, “It’s not about weaning accountants and auditors off spreadsheets, but about using the right tool on the right data to get the best analysis. Spreadsheets are a great tool for small data sets, since it provides an easy way to transform and manipulate data. For large, complex data sets managed by data professionals, more sophisticated tools should be used to transform and manipulate data.”

But transforming and manipulating data is only part of the auditing process. Uncovering anomalies, whether accidental or deliberate, requires recognition and analysis capabilities that spreadsheets just may not be able to provide. And there seems to be a general consensus that the accounting profession is waking up to the fact that there are better ways to handle the large data sets and workflows inherent in the audit process. But progress is not always smooth, according to Colleen Knuff, vice president of audit product management at Wolters Kluwer Tax and Accounting North America, even when these tools are available.

“I believe that accountants and auditors, for the most part, are adopting tools that make their jobs easier and more efficient. However, they may not always be taking advantage of the full capabilities of those tools. Most people forget 75% of what they learn within a week of training, so it’s no surprise that without a continuous improvement process, firms do not get the efficiency gains they hoped or planned to achieve from new tools,” she said. “With a plethora of choices in tools to perform a wide variety of tasks and workflows, accountants/auditors may also not yet be able to fully automate, streamline or integrate their new tools due to time, money or resource constraints. This may create a sense of frustration that leads to a regression in tool usage where spreadsheets feel like the safe place to go back to work.”

Evan DeFord, a CPA and global director of expert services at Inflo, agreed that inertia is a problem in firms embracing new technologies and new tools: “The global pandemic was a huge catalyst for driving accountants and auditors to seek to leverage new or additional tools and technologies. Unfortunately, we are seeing there is still a broad range to the breadth and depth of the adoption of tools and technologies for the profession. Many firms have had an ‘awakening’ to what tools are available in the market, but now are either in a state of paralysis by analysis, hold off deploying technology at scale due to [fear of missing out] and therefore are just dabbling in the space. So, it is great that firms and individuals are aware that there are so many solutions available to them, but the struggle now is breaking the inertia from traditional practices.”

Still, there is great pressure in the profession toward change and adoption of enhanced technologies and tools. Jeff Gramlich, managing director of accounting at Validis, said, “I think we all agree that [auditors] are not taking full advantage of the tools, but there has certainly been a noticeable shift over the last few years. Accounting firms frequently struggle with change management and often wrestle with the operational undertaking of implementing new tools versus a SALY [same as last year] approach. When the firm experiences new pressures, in addition to those presented by clients, such as the Great Resignation or ramping up for the regular busy season lean and game-ready, this drives the appetite to change. Firms are now regularly asking themselves how they can improve, how they can adapt, and how they can adopt new tools to facilitate this change for the better across the audit process. There is a collective desire of the industry to drive towards improved audit quality and offering even greater services and insights to their clients. This will be the single biggest driver of progress for firms along their digital transformation journey. They will not want to be left behind or be seen to be relying on outdated technologies and processes.”

Audit light bulb concept

Duncan Andison/Duncan Andison - stock.adobe.com

But, as Amy Pawlicki, vice president of assurance and advisory innovation at the Association of International Certified Professional Accountants, pointed out, sometimes it’s not the tools that are the problem, nor is it getting accountants to use them. “Accountants and auditors have access to many tools to help with automation and workflow efficiency, and they absolutely are taking advantage of them,” she said. “As far as spreadsheets are concerned, they can be a perfectly effective tool, depending on the situation. In more complex situations where there is a lot of information to be analyzed, you likely need a more sophisticated tool. Where there is room for improvement, I believe, is better access to client data that’s in consistent, reusable digital formats. This is particularly important as more tools make use of machine learning. With better, more consistent access to data, we’ll get better results with the new and innovative tools that firms are already using.”

Auditing from afar

The process of auditing has changed greatly as a result of the pandemic. It’s not especially common anymore for large teams of auditors to arrive on-site for the duration of audits. Somewhat fortuitously, there was already a move in the way practices have adapted to performing audits remotely, fueled to a large extent by financial operations moving to the cloud or being stored in remotely accessible databases. This has resulted in a paradigm shift in the way auditing services are being conducted and delivered. And that means a major change is required by the firms.

We asked our panel how they deal with this mass transition and evolution of the audit function and the software used in performing the audit functions, and pretty much every one of them emphatically stated that having the financial data in the cloud was essential both for the process of remote auditing, as well as obtaining optimum audit efficiency and accuracy. Along with this, all of the vendors we questioned have recognized the problems inherent in auditing and collaborating remotely.

Wolters Kluwers’ Knuff said, “Many firms have either adopted our cloud-based solutions or moved their on-premise solutions to a hosted environment, allowing their staff to work anywhere/anytime. They have adopted collaboration tools like Microsoft Teams or Zoom to conduct meetings, perform walk-throughs, and generally work in team settings — virtually. Many firms have increased their use and reliance on data analytics tools and started performing 100% population tests where sampling may not be the best approach in a fully remote audit.”

Also pointing out the importance of collaboration and communication was Kalil Merhib, vice president of growth and professional services at CPA.com. “Remote audit was occurring prior to the pandemic. However, it accelerated over the last few years, and suffice it to say, remote auditing is here to stay,” he said. “The biggest challenges around adoption center around firm and client communication and auditor collaboration. Cloud technologies support improved processes for both of these activities. For example, solutions such as OnPoint Collaborate provide firms and their clients a seamless communication platform for exchange of documents that flow directly into the engagement management tool. Solutions such as OnPoint PCR and OnPoint EBP have this functionality built directly into the application. With our cloud-based OnPoint applications, engagement team members can collaborate with one another directly within a ‘chat.’”

Let the software do it

One area where audit tools have tremendously evolved is AI and machine learning. These technologies allow audit software to do a more thorough and effective deep dive into data than was ever possible when the audit process was mostly human-based. In some cases, statistical sampling of large data sets has been replaced with 100% examination of each data point, something that just wasn’t possible in the past.

AI and machine learning have been approached in different ways by different vendors. “We see AI used extensively in audit planning, risk assessment and journal entry testing,” explained MindBridge’s Grosset. “The initial use case for us has been journal entry testing, but once all the data has been loaded for that purpose, there are a myriad of additional valuable uses of the data. One of our most popular reports is our completeness report that validates that the GL is complete and can be relied upon. That means auditors can then use our tool to pull requests, instead of having to go making additional requests of a controller. We also have firms using our interim module to do planning analytics, understanding the entity, and substantive sampling. We also have a module that aggregates up the risk scores of all the transactions to give a user a numeric risk score by account and by assertion. This will be an ever more popular feature as auditors move to the spectrum of inherent risk requirements in SAS 145.”

And CPA.com’s Merhib said, “Auditors are already using tools that leverage artificial intelligence to audit client data. Longer term, there is potential to further leverage AI to support more advanced analytics across broader data sets. Our Dynamic Audit Solution solution, created in partnership with the AICPA and CaseWare International, is being built with a view to support the ability to apply AI and machine learning to the analysis of client data, as well as aggregated, anonymized data covering peer data for benchmarking, and relevant external data. DAS also takes this a step further by leveraging auditor knowledge and engagement data, using data analysis and eventually machine learning to drive suggestions related to risk identification and response.”

Not everyone we spoke to was fully vested in AI and machine learning’s role in audit yet, though all are trying to take advantage of the newest technologies. “We have not yet seen AI and machine learning fully implemented in the audit process, but we believe this is the way of the future,” said Melissa Yard, senior product manager for audit and accounting development at Thomson Reuters. “In 2021 we added a tool to our cloud audit suite that uses artificial intelligence to identify areas of risk that are common to the audit. Here, data is aggregated and anonymized, then AI provides insight into areas where auditors commonly identify risk, and at what percentage, when performing the same type of audit.”

Looking toward tomorrow

As to where audit tools are headed over the next several years, data and analysis was a common theme in the answers we received. According to Validis’ Gramlich, “We see more need for additional data to help with the audit (some structured, some unstructured) and this is a big part of our focus. We see the need for more frequent access to the data but more for analysis, predictive insight, and helping firms become more proactive and integrated across business lines and advising their clients, versus strictly interim audit work.”

CPA.com’s Merhib said, “We expect to see increased use of machine learning and AI to analyze full data sets. Many of the modern capabilities are available to auditors but live in disparate systems. By bringing these capabilities together in a single platform, such as DAS, as well as having advanced capabilities such as audit data analytics embedded directly in the audit workflow and procedures, we’ll continue to elevate the effectiveness and efficiency of the audit process.”

The experts we spoke to pointed out some of the areas where evolving tools can improve audit productivity, accuracy, and improved confidence in the outcome. But the benefits come with a price. A tool has limited benefit if the person or practice wielding it doesn’t know what the tool can do, or have the training to know how to use that tool most effectively. And, along with the availability of the software, there’s also going to be an increasing need for auditors to upgrade their knowledge and skill sets. This might be one of the most intimidating barriers to taking advantage of the ever-increasing and evolving auditing toolset.

Adblock test (Why?)



"difficult" - Google News
April 27, 2022 at 05:10AM
https://ift.tt/w8kTr9W

In audit, new tools are easing a difficult task - Accounting Today
"difficult" - Google News
https://ift.tt/SzHJ1rA
https://ift.tt/kla9yTb

Bagikan Berita Ini

0 Response to "In audit, new tools are easing a difficult task - Accounting Today"

Post a Comment

Powered by Blogger.