The accounting profession has been talking about transforming the audit for years. Today, there are plenty of signs that this moment has finally arrived.
First, cloud capabilities have created entirely new opportunities for collaboration and data sharing between firms, clients, and regulators, as well as within firms themselves. Add to that disruptive developments in artificial intelligence (AI), machine learning, and blockchain and the profession now has the right capabilities to transform the audit. With these advancements, auditors are well-positioned to reimagine how they perform the audit – what they look at, when they look at it, and how they look at it – to drive a more precise focus on higher-risk areas and deliver deeper insights and more value to clients.
Despite all this, many firms have not yet identified or pursued their strategies for turning these advances to their advantage in the audit. Rather than proactively transforming, they are reacting on an ad hoc basis.
In practice, transforming the audit is manageable with the right strategy in place – and the results are worth it. Each firm’s transformation can and should take its own path, based on size, client needs, business goals, and current maturity levels in everything from technology infrastructure to processes and methodologies. As firms move towards transformation, they should be aware of three overarching touchstones to guide their efforts – principles that are shared across all other issues guiding their approach. These three touchstones are: Cloud, Connect and Create.
Utilizing cloud technology
While cloud technology isn’t new, its impact on the accounting profession has grown exponentially in recent years. This is reflected in the growth of online accounting solutions and cloud-based file-sharing tools that are capable of better securing files and centralizing client collaboration. Still, most firms today are defining and developing their comprehensive cloud strategies. Having a clear strategy for cloud adoption and use is a critical aspect of audit transformation.
Connecting with clients
What does “connect” mean in the context of audit transformation? From a methodology standpoint, it’s about enabling a truly data-driven audit through a fully integrated workflow. This translates to using client data and auditor knowledge to drive a dynamic linkage to understand the entity, identify risks, and influence any related controls or procedures. Connecting also means finding ways to deepen client relationships through meaningful discussion about key data insights.
For many firms, connecting still requires a lot of manual processes and redundant efforts, which leads to less than optimal outcomes. Transforming the audit will require entirely new ways of connecting.
Creating the Modern Audit
In an audit transformation, “creating” refers to developing a new methodology that maximizes the potential of technology and data analytics to deliver greater insights – to both the client and the firm. A new methodology, enabled by advanced technologies like those mentioned elsewhere in this article, can help auditors do their work more effectively – mainly by helping them focus squarely on the matters most important to the audit. Instead of following a linear, checklist-approach, auditors can leverage data analytics to guide them through the audit, drilling down on the areas that require attention.
Think about it this way: If your firm could create a brand-new methodology from the ground up, enabled by today’s technologies, what would it look like? This is essentially the question firms should be answering in the “create” phase of transformation. Fortunately, it’s a question that a number of leaders in the profession are already seeking to answer. The AICPA and CPA.com, through the Dynamic Audit Solution (DAS) initiative, are creating a clear picture of the modern audit, with an emphasis placed on how audit methodology changes and adapts to address the challenges of the modern audit.
Accelerate your Firm's Journey Toward Audit Transformation
Want to know how your firm can put these principles to work to actively transform your approach to the audit? Start with our whitepaper on this topic, The Path to Audit Transformation: Cloud, Connect, Create. This report offers practical, specific details on each of these cornerstones of audit transformation, including insights from professionals who are already transforming their firm’s audit approach. The key is simply taking the first step because audit transformation is here – stay a step ahead and your firm and its clients stand to reap the benefits over the long term. Contact us today to learn more.