Jam tomorrow – When will the ‘Audit of the Future’ arrive?

The accountancy and audit industries have been buzzing for decades around the prospect of the audit of the future. As is often the case, many years of talking did not immediately translate into action, and the profession can seem set in its ways and slow to modernise, particularly when compared to other industries. Now, however, we seem to be at a critical stage in our journey towards lasting change, giving cause for optimism that tomorrow’s audit may come sooner than we think. The promise of technology The deployment of technology and digitisation has held the promise of industry-wide positive disruption for years. Yet, whether we’re talking about process mining, harnessing the power of big data or blockchain, we are continually reminded that there is no single magic bullet that will make the impactful changes needed to bring the audit of the future into the present day. We can now see that the proliferation of data throughout the industry has sharpened focus and moved the conversation along. The audit industry, already grappling with how it could use data to positively transform, found itself even more inundated with data during the pandemic as digital transformation programs accelerated and crude data proliferated. There is no shortage of data in the industry, indeed, the amount of data most organisations now deal with is increasing exponentially. What audit has lacked until now is actionable data, essential if a data-led transformation is to take place. What has prevented data from becoming audit’s greatest asset? There have been many obstacles to overcome in order to see data really transform the audit process. Some of these have been cultural - primarily associated with a reluctance to be the first to invest in new, cutting-edge technology. But change is sweeping through the industry in a way that indicates some of these cultural barriers are now coming to an end. A good example of this is the work happening right now in many audit firms to move towards process and controls based audit. This is reliant on evidence from finance and IT systems, and the change in audit standards requiring firms to assess these systems and controls in every single audit. Where traditionally auditors have relied on substantive and sample testing which do not require them to assess the data on an organisation’s controls, auditors are now required to perform this assessment. Many firms are responding by using a much wider range of data to perform a far more substantial assessment of how the audited organisation runs, including using tools like process mining or knowledge graphs, which provide a richer picture of risks in the client and make use of big and distributed data for the first time. When it comes to audit technology, although we still have no single magic bullet to solve all the industry’s challenges, we do have AI-driven solutions that are able to help to access good quality, reliable data to use for analysis. Crucially, tools that provide data in a reliable and high-quality format can speed up fundamental audit tasks like reconciliation and make more information available to auditors, making risks easier to identify and improving audit quality. If barriers to modernising audit were around difficulty delivering on the promise of analytics because of the difficulties of data access and preparation, then those have now been addressed. The technology is now here to pave the way for substantive future change. The impact better, standardised data access will have across the industry should not be underestimated. It will not only enable greater levels of innovation but more competition across the audit industry, enabling smaller players to compete on a more level playing field with their bigger, more established competitors. Supporting firms in levelling-up the audit marketplace is likely to have a positive, transformative impact on the industry as a whole. Addressing the audit data challenge Is it too optimistic to think that the audit of the future has finally arrived? From my perspective, it actually seems like a rational conclusion to draw, not least because the technology is now here to make this happen. The cultural barriers may take longer to dissipate, but change is happening in pockets of the industry and that change is infectious, transformative and incredibly exciting. By Franki Hackett, head of Audit and Ethics at Engine B