We can already see the advancement of big data and analytics having a real impact on what the audit delivers and the insight it provides. And taking advantage of the latest developments, technology affords us the opportunity to deliver a new type of audit, with an even greater focus on quality. The future of external audit will ultimately cause a shift in everything from inspection of evidence relating to random samples, to analysing larger volumes of audit-relevant data that allows for targeted analysis of risk areas and potential anomalies. New technologies are focused on helping to ensure that auditors spend less time with the administration of an audit, and more time on thoughtful analysis of the data – essentially focusing on what matters.
And what do these advancements mean? Access to more data helps financial reporting and early identification of matters including fraud and operational risks, which in turn can be integrated into a more targeted audit approach. With deeper insights at their disposal, auditors are better positioned to ask more challenging questions to gather evidence and exercise more professional scepticism – ultimately delivering a more effective audit. This oversight cultivates a more holistic understanding of a client’s financial close process and business operations, thereby enhancing each of the key audit phases – from scoping and assessing risks, to tests of controls and details.
Yet the impact of technology on the profession goes beyond the delivery of an audit, as there is no business today that can ignore the impact of disruption. Changes in technology such as big data and artificial intelligence will perhaps provide even stronger and more perceptive tools for the profession to interrogate data, find potential anomalies and potentially improve audit techniques, thereby leading to higher quality audits. These will reshape the profession and accountants by providing them with more potent tools to achieve their work.
Read more from our Global Review 2016 series
The advent of blockchain technology has also focused minds on what it will mean for the future of corporate reporting. It has the potential to transform our world. Real-time systems potentially offered through the distributed ledger system could provide companies with the ability to close their books every day and could highlight and investigate anomalies and unusual transaction patterns as they emerge. It certainly offers plenty of risks, opportunities and will reshape how organisations work. However, companies, and accountants alike, will need to overcome several challenges before they can take full advantage of blockchain’s potential, including technology and organisational processes.
No doubt, opportunities will be posed by Bitcoin and Fintech technologies, which are still in their early stages. There will be challenges in establishing the authenticity and existence of these digital currencies or assets, in valuing them and likely in establishing active markets and exchanges. Accounting firms are still exploring the impacts and promise of these new technologies and techniques on auditing, accounting and finance.
Of course, like all organisations, we need to navigate our way through these changing times. If there is one lesson that I keep coming back to throughout my career is that we cannot be afraid of responding to change. People often think that the audit has not evolved. While the concept of double entry bookkeeping was first published in 1494 by the Italian monk Luca de Pacioli, we can be sure that the audit process has changed considerably since then. The more recent introduction of fair value shows just how the audit approach has evolved to be more forward-looking.
To stay relevant and to deliver long-term value through our services, which provide confidence to the capital markets, we must evolve the way we work to respond to changing expectations. It is about meeting new regulatory requirements, evolving investor demands and the changing concept of corporate reporting, which will expand to include non-financial information.
Ultimately, technology can enable you to do what you do better, yet it can also lead to real change. Technology can continually evolve the audit so that it provides more relevance, improves confidence and serves the capital markets better. It is our job as auditors to ask better questions that help navigate this new world, ensuring that our answers lead to a positive effect on society by strengthening the capital markets and economies. At times like these it is imperative that audit firms evolve alongside the data that they are analysing and stay ahead of the changing technological landscape.
Felice Persico is EY global vice chairman - assurance