The digitalisation process at auditing companies is always discussed separately from the digital transformation in corporate accounting. Digitalisation is developing in the same direction in both areas. In the future, they should rather not cannibalise each other, but rather complement each other — without auditing firms losing their core tasks.
AUDITING PROFESSION GOES DIGITAL
The last decade has seen a significant increase in the audit profession’s adoption of a range of software and hardware solutions. The new digital tools have reduced or eliminated a great many manual tasks and human errors, streamlined data collection and other audit processes. Recent research found that more than 80 percent of auditors used data analytics and other emerging technologies during the pandemic.
In the future, the automation of processes and the use of AI and blockchains will increase. The objectives are to enable deeper data analysis, to better recognise anomalies in data, to identify risks and to gain more financial insights of the clients. Auditing will become faster and more efficient and deliver more quality.
One example: Auditors traditionally use sampling to look at contracts and other paperwork, typically reviewing 100 or 150 randomly selected documents out of hundreds of thousands; with data analytics, they can screen all documents and manually focus only on those that raise red flags.
AUDITORS MUST BE AHEAD OF DIGITALISATION IN ACCOUNTING
At the same time, a digital transformation is taking place in accounting. The corona crisis has caused companies to realise that they should react faster to market situations. To do this, they need valid financial data at all times so that they can act. That is why companies are investing in cloud solutions, automation, machine learning, and advanced and deeper analysis as well. They’re also interested in improving their accounting efficiency, data literacy, and agility. More than 50 percent of accounting tasks can be expected to be automated, predict some studies. In addition, the automation shall eliminate errors, save costs and help accountants to cope with the explosion in the volume of data.
If clients are not yet very far advanced with their own digitalisation, then the digital systems in the auditing companies are of great help for financial auditing. But when companies begin to store their financial data in the cloud, bring it all together in a single source and display all transactions in a blockchain, so that comprehensive information and in-depth analysis can be provided anytime and anywhere, then auditor testing and review will be a thing of the past. With these new methods, companies will already be able to produce a transparent and trustworthy financial report that no longer needs much help from auditors.
As tomorrow’s accountants in the companies will take care of the systems and the analytics of the financial data, auditors have to move up the value chain. They now need to focus on the right interpretation of the data, deliver their specialised insights, judgment, and business acumen that machines aren’t capable of. Auditors should shift their focus on the consultancy regarding the clients’ business future. That can include strategic financial advice or risk management. In addition, they can also provide support with further audits regarding ESG or sustainability. In this way, the duties of accountants and auditors complement each other very well.