The future of auditing is rapidly changing and is being shaped by various challenges and developments. Auditors must stay ahead of the curve by embracing emerging technologies and methods to audit excellence and transparency. They should also be flexible to changing business models and regulations.
In the future, regulators and investors will seek tech-savvy auditors who know how technology can improve auditing standards. In this blog, we will check out the auditing challenges and how technology is shaping the future of auditing.
Table of Content
Traditional auditing challenges
1. Manual auditing
It’s not feasible for numerous businesses to constantly track all controls and configurations individually. The days of going over listings and spreadsheet results are long gone.
Even in the most developed and complex ERPs, audit logs can be large and difficult, indicating that standard formats like Excel don’t scratch the surface, with organisations needing help storing petabytes of data in data centres.
Additionally, audit logs are often accessible for a fixed period, frequently 30 days. Trawling a daily log created by just one environment is difficult enough, but potentially evaluating many days’ worth of information at a time is even more challenging.
With so much to review, it is easy to lose sight of behaviour anomalies and control discrepancies.
2. Data privacy and security
One of the primary obstacles in auditing is the growing complexity of the security and privacy of data laws and regulations.
Data privacy laws will strongly influence the future of auditing. As businesses gather and maintain more data, auditors need to be able to ensure that this information is protected and that they are compliant with the relevant regulations and laws.
This requires an in-depth knowledge of the complicated legal and technical problems involved in the security and privacy of data, as well as the ability to evaluate a company’s compliance with those laws.
With the growing demand of cloud-based services and remote working, this obstacle has become even more complicated.
3. Emerging risks
In auditing, recognising and handling new threats have become an essential challenge. New hazards constantly arise as sectors develop and technology advances, demanding auditors’ focus and attention.
Whether it’s the effect of disruptive innovations, shifting dynamics in the market, or unanticipated global events, auditors must remain vigilant and evaluate these emerging risks.
The ability to anticipate and navigate through unpredictability requires an in-depth knowledge of the company’s landscape and the agility to adjust audit approaches swiftly.
The difficulty lies in creating frameworks that can efficiently assess and mitigate risks that might need to be prominent or adequately understood in traditional audit techniques.
4. Subjectivity in judgments
One of the difficulties of auditing revolves around handling areas that fundamentally involve a degree of subjectivity, like valuations and estimates.
Evaluating the precision of cash flow predictions, fair values, and other judgement-based elements necessitates auditors to carefully balance professional scepticism with an in-depth knowledge of the overall business context.
Auditors constantly grapple with the complexity of financial reporting, where interpretations and assessments can differ. Achieving the right balance between thorough evaluations and acknowledging inherent subjectivity requires a nuanced and considerate approach.
Role of technology in auditing
1. Advanced security
Privacy laws will strongly influence the foreseeable future of auditing. Technology can help audit teams come up with answers to these problems. Team risk and change responses are accelerated via audit preparation applications.
With this preparation, teams can create risk-based audit plans replete with risk metadata for rapid implementation and constant assurance.
2. Data analytics and AI
Data analytics and AI will improve the audit process by allowing auditors to derive useful knowledge from structured and unstructured data. Predictive analytics will assist auditors in detecting high-risk areas and concentrating their efforts accordingly.
AI-powered tools can additionally automate routine tasks, enabling auditors to focus on higher-value activities like risk assessment and strategic analysis.
3. Blockchain technology
Blockchain technology holds enormous possibilities for transforming the audit profession. As a distributed and immutable ledger, blockchain can improve the accountability, traceability, and safety of financial transactions.
Smart contracts on blockchain-based systems can automate compliance processes, simplifying the verification of contractual commitments while decreasing audit complexities. By utilising blockchain, auditors will have real-time access to transactional information, ensuring the accuracy of financial reporting.
4. Cloud-based Auditing
The utilisation of cloud-based systems for auditing is becoming more prevalent, allowing remote work and improved productivity. Also, since everyone will use the same technological advances, the organisation of data and files will remain uniform, making the procedure more efficient and uncomplicated.
Cloud-based tools can additionally assist auditors in communicating more efficiently with customers, offering more insightful additional services, and shaping the future of auditing.
5. Big Data
The increasing availability of information is developing the auditing profession, allowing auditors to recognise potential risks and possibilities more quickly and accurately.
Big data analytics can assist auditors in evaluating large volumes of information and detecting patterns and trends that may not be immediately apparent.
This also allows auditors to offer their customers more insightful and value-added services and detect possible fraud and other irregularities.
This analytical prowess not only improves the effectiveness of audits but also opens avenues for the auditors to provide greater understanding and value-added services to their customers.
Final thoughts
Technological advances enhance human auditors, and this connection is set to alter the norms of the auditing procedure in the coming years. Technology and auditing are two sides of the same coin, and their partnership is already shaping global approaches.
The simple truth is that implementing technology with auditors will not spell the demise of traditional accounting but will redefine a fresh start.
The methods and audit quality offered through automation have made it a vital component of large auditing companies, and even customers want to work with firms that use advanced technologies in their systems.
Auditing automation enhances the quality of engagements while providing greater insights for numerous companies worldwide.
