“To maintain the reputation of a CPA as the most trusted advisor, reimagined audit services must be our future.” Those words perfectly summarize the sentiment of Thomson Reuters in its “4 Keys to the Future of Audit” whitepaper, representing a viewpoint that most experts in the industry strongly support.
With a growing emphasis on technology, particularly automation, in the financial sector, there’s a critical need for the audit process to advance. After all, it continues to be one of the core activities for CPA professionals and its overall importance in the industry shows no signs of diminishing.
The Current State of Financial Auditing
Changes to the audit process often come in come in major waves. Think back to after the 1929 market crash, for instance, which was one of the first events to usher in “modern” auditing, which has ever since played a key role in instilling confidence in the public when investing in markets around the globe.
However, in the decades since, the audit has slowly and steadily continued evolving, having to adapt to the age of computers and, more recently, to the increasing use of data analytics. Meanwhile, CPAs continue to play a critical role in this evolution, striking a balance between automation, digitization, and human-driven processes while ultimately shaping how these advancements are altering the way they interact with their clients and their work.
Of course, these gradual changes couldn’t happen fast enough for some advisors. Recent research from McKinsey Global Institute shows that the industry’s adoption of existing tech still has a long way to go. For instance, they estimate that almost half of all industry work activities could be completed with current automation technology. Deloitte, one of the Big Four firms, has similar projections, stating that 40% of basic accounting work could be entirely automated.
These numbers go to show that the current state of automation has major room for growth, and with automation technology continuing to advance in the interim, there’s no doubt that the account industry can expect major changes in the next five years.
The Growing Role of Tech & Automation in Finance
Advancements on six fronts are coming together to fuel the growth of automation within the accounting industry and beyond. These elements include the continuous, exponential growth of available data alongside advance data mining tools; everything “as a service” business models; data science and analytics; artificial intelligence (AI) and machine learning (ML); and last, but most certainly not least: the move toward’s unlimited, cloud-powered processing capabilities.
As you look at these individually advancing technologies as the powerful combination that they are, it’s easy to see that real-time reporting is becoming more accessible and critical to day-to-day business processes than ever before. Increased timeliness in financial reporting is on the horizon, and it’s a moving target industry players should be constantly striving to outperform thanks to growing use of cloud and automation technology.
Beyond that, though, we’re also headed down a road to constant and continuous monitoring — an effort that stands to greatly benefit the public, but one that also requires great effort and continued innovation to achieve. Take blockchain, for instance, which is the powerful distributed and 100% digital ledger that powers the likes of Bitcoin and other P2P networks. While it’s still unclear the exact way blockchain could be put into practice in our industry, auditors are seeing great potential thanks to its scalability.
As such, many firms are looking into it, including AICPA’s technology branch, CPA.com, which is working in collaboration with one of the leading trade organizations for financial market professionals, the Wall Street Blockchain Alliance. Together, they’re working to examine the issues associated with blockchain to figure out how auditing, tax, and accounting professionals can address and utilize it.
Yet another example of complex technology that experts are currently researching is artificial intelligence. While certainly more familiar to the masses, AI still has a long way to go in development, but is already being put to work for basic processes. Still, AI lacks transparency when it comes to its extremely complex algorithms and the way it (and machine learning) work when looking at them in the context of an audit.
When it comes to AI and ML, AICPA and CPA.com are on the case with this tech, too, currently in collaboration with one of the world’s leading audit software companies, CaseWare International, to develop an integrated, scalable solution for deploying tech-enhanced auditing capabilities for firms big and small.
What Experts Are Predicting
As we continue looking forward at what is to come, it’s worth reviewing some predictions and trends from industry experts that are expected to drive the development of the modern audit.
Newcomers Need To Be Tech-Fearless
In its most recent annual list of “Emerging Leaders,” Internal Auditor magazine showcased the profiles of countless young professionals who had one thing in common: A proud embracement of emerging tech. These profiles demonstrated that the most successful young professionals are passionate about the likes of blockchain, robotics, and analytics and they recognize just how big these technologies will be for the future audit.
Audit Culture is Taking Over
“OnRisk 2020: A Guide to Understanding, Aligning, and Optimizing Risk,” a report published by IIA, demonstrates the growing emphasis on data ethics and AI governance. In the past five years, the industry has come a long way in developing an “audit culture” where businesses are looking more closely at the soft skills required to work effectively, and through this, we’re coming to a much deeper understanding of how culture impacts every aspect of operations, and can also be at the root of inefficiencies.
Today, this same approach is consider critical to sound internal auditing processes, and with CAEs predicting that data ethics will be the second-fastest growing risk between now and 2025, there’s no doubt that this outlook will continue to be crucial. In fact, the OnRisk report only identified data and emerging technology to be higher on the list of growth when it comes to relevant industry risks.
The “Uber” of Auditing
We’re living in a gig economy with more previously full-time positions being outsourced as short-term contracts or even entirely freelance work. This mindset has touched just about every industry, and experts agree that this same approach will find a comfortable fit within the internal auditing industry. One thing in particular that’s expected to fuel this change is the growing need for skillful professionals who are able to quickly respond to tech risks and cyber threats.
From the perspective of a Chief Audit Executive (CAE), on-demand professionals will play a key role in the sourcing strategy in order to meet this growing demand. Meanwhile, experts say there’s going to be a time when it’s just going to make more sense from a business standpoint to call up a service to locate short-term help when it comes to an internal audit task or advisory project.
Take Advantage of Today’s Cutting-Edge Tech
Ultimately, there is a vast amount of advancement, adoption, and adaption to come, but what about firms who are actively interested in staying on the cutting edge of these technologies? The key for them is to partner with the right solutions provider who can ensure they have flexible, scalable access to some of the latest tech while making sure they’re able to continue with proven, effective processes.
If you’re seeking such a partnership, look no further than Multiview ERP. Our highly scalable ERP solution is backed by powerful technology that will effortlessly integrate into your processes, giving you a multilevel, multicurrency view that helps drive your performance and profitably scale up your business. Click here to learn more about what we offer.