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Audit and technology: not a panacea, but a catalyst for improvement

By Maggie McGhee

AI, technology, data

There is a lot of hype about technology, artificial intelligence (AI) and machine learning (ML)—and the audit and accountancy professions are not immune from this. So it’s important for auditors to better understand both the hype, and the working environment the technology operates in.

The latest advances in technology promise significant benefits for the audit profession, with a number of key drivers signalling the need for technological change in audit.

Such drivers include the rapid increase in volume of data, the changes in business models, the shift towards automation and the demand for a proactive and forward-looking approach to audit. These developments require auditors to be technologically sound to enable them to continue servicing businesses and to execute high-quality audits.

The Association of Chartered Certified Accountants (ACCA) has published research to support businesses and auditors on how they may adapt most effectively in the face of significant change.

Audit is moving from being a reactive, backward-looking exercise to a proactive, predictive, forward-looking one, working in real time

The Audit and Technology report, produced with colleagues at ACCA’s strategic partner CA ANZ, reveals the audit profession is still at the very early stages of introducing AI, but should guard against full implementation.

One such reason to be on guard is that the audit profession is still at a very early stage with AI and has not embedded it as deeply as it could. Furthermore, if AI and related technologies are fully implemented, we will need to answer new questions relating to auditors’ independence.

To address these well-placed and important concerns on technology taking over, ACCA believes the human relationship between both the organisation and their auditor remains important: not everything can be replaced by technology. However, auditors will need to be more adaptable to change in future.

Technology, of course, is never the panacea to resolving all the current challenges in audits, or conversely seizing all of its future opportunities, but it can undoubtedly help.

We believe it can act as a catalyst that will help shift the focus of the audit process from a retrospective view to one which is prospective. A survey ACCA carried out in support of the report reveals of the available technologies, data analytics is currently the most mature and is currently used by most audit firms.

Technology offers the ability both to improve the quality of audit and to add value to it: audit is moving from being a reactive, backward-looking exercise to a proactive, predictive, forward-looking one, working in real time.

It also has the capability to renew processes that improve audit quality and increase efficiency. These developments could be a force for change and for good, at a crucial time for the profession.

Public scrutiny

Audit is facing unprecedented levels of scrutiny in the UK and overseas, including what the public expects from auditors.

In ACCA’s report Closing the Expectation Gap in Audit, we found that 55% of the general public across 11 countries believe that auditors could prevent corporate failure if they followed the requirements of existing auditing standards.

Furthermore, the report’s 11,000-person survey showed 70% believe that audit should evolve to prevent corporate failure.

Like all transformational stories, technology in audit is the enabler: an enabler to renew processes that improve quality and increase efficiency

Although some may reasonably argue that such demands are unrealistic, technology may help to satisfy the public demand, at least partly, in the future. Even in its traditional context, technology now offers an opportunity to produce higher-quality audits.

Like all transformational stories, technology in audit is the enabler: an enabler to renew processes that improve quality and increase efficiency.

The ethical dimensions of how technology is being developed and utilised in the profession—and indeed in wider society— will undoubtedly continue to be debated in the years to come.

Perhaps this is one of the biggest challenges we can address now in the 21st century: how not to fear technological change, but to embrace it, use it for the best advantages possible and help create the technological future we want in the profession, from audit to financial management to tax planning.

Maggie McGhee is director of ACCA’s Professional Insights team.

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