Auditors, particularly internal auditors, need to be responsive to the risks introduced in the digital economy and the Fourth Industrial Revolution (Massey et al., 2018). The digital economy is impactful not only in how auditors conduct auditing but also what they audit. First, the substitution of routine and tedious tasks such as compliance testing with machine learning traditionally performed by auditors means that this would create opportunities and capacities for auditors to direct more attention on the high-risk areas requiring human judgement (Massey et al., 2018). The digital economy now sees more information being recorded, stored and used in digital format on servers. With the use of cloud computing and technologies such as videoconferencing and screensharing, this has made it more efficient for auditors to overcome time and space barriers such that it is possible to work more collaboratively. Indeed, it can be seen that auditors now are increasingly working remotely and with others across countries. Furthermore, big data and advanced analytics has enabled auditors to develop better understanding of their clients and the data, and to provide forward-looking capabilities and forecasting (ACCA, 2019).
Recent technological developments include blockchain technologies which has reduced the need for verifications of the authenticity of accounting transactions because all information is unaltered in blocks (Kamordzhanova and Selezneva, 2019). This reduces the number of intermediaries in transactions and lowers the risk of intrusions on the internal organisational systems of clients. For auditors, blockchain means that less time would be needed by the auditors in verifying transactions and records. The centralisation of digital data also means that auditors would be able to more conveniently access data and inspect the flow of data in real time (Kamordzhanova and Selezneva, 2019) increasing audit efficiencies. However, with the increasing reliance on digital data, the risks of cyberattacks are more frequent and complex, as well as the use of social media by employees and consumers which impacts on the audit risk assessment (ACCA, 2019).
The regulation of artificial intelligence is still under-developed globally. Even so, there have been examples that demonstrate the effectiveness of AI in understanding unstructured data. For example, Ernst & Young has already introduced AI in auditing lease contracts, that “can read hundreds of pages of contract documents and reduce the time it takes for humans to review and audit contracts” (ACCA, 2019: 4). At the same time, as AI technology becomes more prevalent in companies, it is expected that auditors would increasingly play a more crucial in ensuring the use of robotics, for instance, adhere to the global or national standards and regarding personal data protection at their clients. As such, it can be seen that the auditor not only needs to apply emerging technologies in their work to improve audit quality and reduce costs, but also need to understand how to audit them at client organisations (KPMG, 2017).
Future Outlook for the Auditing Profession
The modern audit profession has limited exposure to new technologies including analytics, big data and cloud computing. At present, there are also challenges concerning the lack of standardisation in the auditing of businesses using new technologies. However, trend in the increasing adoption of these technologies means the need for auditors to understand a wider repertoire of technologies is becoming more crucial such that tools used today may become obsolete in future (Massey et al., 2018). For example, it is expected that the AI and predictive analytics will play an even more crucial role in audit tasks that typically required judgement of the auditor.
As yet, the legal and economic status of cryptocurrencies means that they are not yet able to meet the definition of the cash or cash equivalents or even financial instruments, but are instead viewed as intangible assets or stock (Kamordzhanova and Selezneva, 2019). In the future, the increasing use of cryptocurrencies might be positioned to alter the concept of money and assets. It is expected that there would be a greater focus on the development of new standards concerning the cryptocurrencies that will need to be considered by accountants and auditors (Kamordzhanova and Selezneva, 2019). Though the implementation of new technologies offers significant opportunities to improve audit quality and efficiencies, it is also important to realise that the artificial intelligence capabilities are not overestimated so that auditors will remain vigilant (ACCA, 2019).
The trend in digital technologies as a source of sustainable competitive advantage means that auditors will be increasingly expected to offer expertise on how the internal controls and business processes in an organisation can be enhanced and have a greater involvement in risk management in their implementation (Massey et al., 2018). The role of the auditor is expected to evolve into one that is expected to have greater technological capabilities. Whilst internal auditors in particular are likely to be housed as the “service center” and “data analysis expert” in companies (Massey et al., 2018: 12). Therefore, audit companies will need to invest in talent management strategies and development to ensure auditors are prepared for the technologies of tomorrow.
References
ACCA (2019) The impact of Digital and Artificial Intelligence on audit and finance professionals: harnessing the opportunities of disruptive technologies [online] Available at: https://www.accaglobal.com/content/dam/ACCA_Global/Technical/Reports/30%20January%202019%20ACCA-EY%20event%20%20REPORT%20FINAL.pdf [Accessed: 08/02/2020]
Kamordzhanova N. and Selezneva A. (2019) The Impact of the Digital Economy on Accounting, Reporting and Audit Advances in Economics, Business and Management Research Vol. 79 pp. 228-230
KPMG (2017) Impact of digitization non the audit profession [online] Available at: https://assets.kpmg/content/dam/kpmg/ch/pdf/ac-news-8-impact-digitization-en.pdf [Accessed: 08/02/2020]
Massey L., Kristall M., Panfil T. and Mack D. (2018) Moving at the speed of innovation [online] Available at: https://www.pwc.com/na/en/assets/pdf/2018-pwc-state-of-the-internal-audit.pdf [Accessed: 08/02/2020]
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