Across the globe, companies, the audit profession, professional bodies, and regulators are increasingly concerned about the impact of technology. Technology can deliver clear benefits, from operational efficiency to financial inclusion and deeper insights. However, with these benefits come many risks, which still need to be fully understood.
As the auditing and accounting world continues to evolve, the next decade of technological advancement is so interesting that auditing has already begun to move towards a nearly paperless and sustainable process. Likewise, as artificial intelligence advances, the future of auditing will be impacted.
The technology is developing rapidly and has been applied in many emerging fields, such as driverless cars, blockchain technology, space exploration, financial services, investment portfolio management, etc.
Technology Remodeling Auditing.
The technology allows humans to program and automatically mark accounting entries in the system. This reduces the day-to-day work of HR and allows them to spend more time on productive activities and critical thinking. So by creating a sophisticated machine-learning-based model, auditors can program the software to look at fraudulent accounts, high-risk profiles, and transaction anomalies. Another example of how AI is redefining auditing is contract auditing.
Allowing technologies helps the auditor to work smarter and better, tools can help to optimize their time, energy, and productivity, shifting their focus to a broader, deeper, and more analytical role. It also enables them to ask better questions of their organization, audit committee, and treasurer, which adds significant value to the audit process.
Impact of technology on auditing
The world is becoming increasingly dependent on technology, and the impact on the audit profession will be unprecedented. These tools help auditors leverage machine learning, neural networks, and language technologies to eliminate massive manual processes and make the audit process increasingly faster, richer, and more automated.
With artificial intelligence, identifying deviations becomes faster. It uses data mining, machine learning, and speech recognition, among other related technologies, to present the results to auditors. Many tasks that auditors previously performed manually, such as ingesting, authoring, and analyzing data, are now automated.
The AI process in the audit system eliminates the need to create tests, write scripts, or memorize all functions and rules and helps to identify anomalies and understand the ledger in less time. This increases the chance of assurance and reduces the chance of medical error.
Technology acts as a watchdog, monitoring fraudulent transactions or illegal activity, which can lead to money laundering, market manipulation, or bank fraud. The system can report this to human auditors and let them know.
Increasingly powerful technological change in the auditing profession is redefining what auditing is and what it entails. A series of leading technologies at various stages of development, from artificial intelligence, blockchain, and robotic process automation to machine learning, have occurred and will continue to change the steps of providing audit and assurance services in the foreseeable future.
Artificial intelligence in the auditing process
Artificial intelligence (AI) is all about systems or machines that can think and learn. AI systems use data analysis and intelligent algorithms to make decisions based on predictive methods. Sophisticated algorithms are developed to suggest decisions based on patterns or behaviors learned with time. AI has applications in different industries; it is used in room reservation systems and calls centers in the hospitality industry, ticketing predictive maintenance in the airline industry, and food and beverage operations.
Audits must be based on the logical flow of operations due to algorithmic invisibility. AI scrutiny should ensure that unintended bias is added to algorithms. In addition, auditors must assess the effectiveness of algorithms and whether their outputs have been properly reviewed and approved. Since AI is built on software modules, auditors must also consider cybersecurity and look for potential bugs and vulnerabilities that could be exploited to affect AI functionality. Internal auditors can use the Institute of Internal Auditors (IIA) AI Audit Framework. The framework is divided into two parts with three components—AI strategy, governance, and human factors—and guides how to audit AI at different stages of its development and deployment.
Internet of things
Imagine a refrigerator placing an order from the grocery store whenever the supply of eggs falls below a certain amount. Soon, everything in the house will be connected to the internet. Machine components and industrial components on planes and ships will be able to collect and analyze data, send information to maintenance agencies, and report anticipated failures. Forrester predicts cybercriminals will target IoT devices for ransom. This means attackers will be targeting customers and their IoT devices for ransom.
The main components of IoT are data collection, analysis, connectivity, people, and processing. This is a disruptive technology that auditors must actively pursue as IoT changes business models and impacts an organization’s strategic goals. In addition, an entity’s risk profile changes as it becomes exposed to new laws and regulations.
Given the heavy reliance on the internet, auditors must focus on data privacy, hacking, outages, and cybersecurity risks. These guidelines set three high-level goals: secure devices, secure data and protect individual privacy. In addition, the guidance identifies risks that must be mitigated to achieve these three goals.
A blockchain can be defined as a distributed and immutable ledger that contains information about every transaction since its creation. Since transactions are recorded only once, they share a unified and identical view of the record. The immutability of the blockchain also means tamper-resistant: to correct an entry, a new entry must be created to correct the error. Both entries are visible to all participants, leaving a clear audit trail. Blockchain can be used to verify transactions reported in audits. For example, auditors can refer to the blockchain’s ledger instead of examining a client’s bank statement and various documents related to a particular transaction. At present, the verification time of a small transaction in a single block verification is about ten minutes; in the six-block verification process, a high-value transaction takes about one hour to complete. In addition, the nature of the transaction itself may lend itself to fraud and presents a higher risk of material misstatement than a commercial transaction between two related parties.
Robotic process automation
The management agenda has been processing efficiency, customer experience, and control effectiveness. As the name suggests, RPA is the automation of repetitive user actions. Not all RPA requires auditor attention. This depends on the type of automated process, the complexity of the automated process itself, and compliance and business continuity issues that may increase the risk level of the automated process.
Although RPA provides consistency, it is vulnerable to a rapid response when related processes or systems come under cyber attack.
Therefore, auditors must understand the process of robotic process automation, which includes data extraction, aggregation, sanitization, and cleaning. Dubai Auditors must understand these processes to begin an audit. Likewise, a comprehensive warranty process may require a source code review. To perform objective testing, auditors must understand the tools used to develop and maintain RPA. This is useful when auditors review logs, configuration controls, privileged access controls, etc. General IT controls apply as always.
Audit Firms in Dubai Using Advance Technologies
To Audit Firms In Dubai successfully implement technology and analytics, it is also important that employees are willing to think about audits differently than in the past. To that end, VVAS embarked on a transformation in which assurance partners and other audit team members were trained to create a digital mindset.
VVAS has also established innovative business improvement committees within the firm’s assurance and tax business units. Team members’ ideas for specific improvements are presented to these committees, which assess and evaluate the best opportunities the company can pursue.
VVAS team members look for consistent tasks, processes, and deliverables that have the little nuance or change too often. Robotic process automation (RPA) or basic automation tools often allow companies to perform these tasks more efficiently.
They have automated some standard engagement and post-audit letters sent to clients. In addition, they are developing processes that use machine learning to scan contracts and summarize some key clauses in those contracts to facilitate analysis. In general, automation is useful to auditors (and preparers) when dealing with many contracts containing the data required to perform accounting under the FASB’s new Revenue Recognition and Lease Accounting standards.
Emerging technologies in the audit process present opportunities for organizations and expose businesses to new risks. Auditors should determine the appropriate balance between the costs and benefits of internal controls to mitigate these risk factors. This includes understanding how technology integrates with the business, how it is managed, which activities are automated and controlled, what is the impact of this automation on the business, and how to control and monitor negative impacts. Although Dubai auditors are only experts in certain technologies, they should be able to identify the risks inherent in these technologies. This includes understanding the architecture of the technology, the internal control framework embedded in the technology, and its integration with the business.