A combination of technology developments and regulatory change are stimulating a major shift in audit approaches, according to practice software specialist CaseWare.
The developer recently published an eBook setting out its philosophy of the “data-driven audit”.
The arrival of online accounting systems has coincided with an unprecedented level of churn within the audit market caused by European audit rotation rules and rapidly rising thresholds. As a result, audit firms are looking to streamline their systems and reduce costs to stay competitive.
According to CaseWare UK sales and marketing director Shez Hamill, the core concept behind the new audit model is to analyse general ledger data. Cloud computing makes it possible to access live transactions in a non-intrusive, remote manner. But connecting live transactions to intelligent analytical systems is what will kick-start automation.
“If you have access to transactional data and the tools to interrogate it, you can remove sampling and analyse the data directly,” he explained. “Sampling is an imperfect test, but a machine can look through the transactions for duplicate journals, repeats of fixed amounts or other outliers such as transactions that took place at odd times.”
But the challenge of real-time audits isn’t just technological, the CaseWare paper argues. Automation will also demand new kinds of skills from the profession. The onus will be on auditors to look beyond the trial balance at the bigger picture, and to draw on insights from external information sources including industry benchmarks and Companies House.
“The new face of audit will inevitably demand a new type of auditor, armed with a new set of skills centred around the ability to make fine-tuned risk judgements rather than constant checking debit and credits,” the paper argues.
The data-driven audit is still something of a glimmer in the eye of CaseWare CEO Dwight Wainman, but the UK subsidiary is starting to see demand from accounting firms to analyse data in a more useful and pragmatic way, Hamill said.
The data-driven model underpins CaseWare’s product development plans and company is enhancing its own analysis, data visualisation and audit quality review tools. Updates scheduled for 2017 will embed these capabilities to its audit platform.
The convergence of audit-related technologies means CaseWare will need to collaborate with cloud accounting engines and specialist tool providers to deliver the concept, Hamill continued.
“There will be a number of players that come to market with data interrogation tools. Our focus is on the audit side. We see our competitive advantage of being embedded into the audit process itself.”
You might also be interested in
John Stokdyk sadly passed away in June 2023. He had been with the site since 1999, rising from news editor to editor in chief, global editor and head of insight. As a roving editor, he investigated the profession's use of technology around the world. He devoted his spare time to technology history and an oddball collection of stringed...