Blog

Home / Insights / Blog / Are You Ready for the Audit of the Future?

Are You Ready for the Audit of the Future?

by

The accounting profession is undergoing significant change as technology continues to impact it, especially as it relates to auditing. Initiatives are underway in two main areas. First, firms are embarking on efficiency projects, using new technology, that employ workflow management processes and leveraging big data and data analytics to provide real-time, forward-looking value to clients.

Secondly, the American Institute of Certified Public Accountants (AICPA), the professional governing body of the accounting profession, has been developing initiatives to help firms offer innovative new services to clients. Below are the top three issues that will have the most impact on shaping the audit of the future.

Embracing Technology

There are many buzzwords regarding new processes and services in our profession right now, all of which will revolutionize the way firms offer services to clients and how clients and firms interact with one another. In addition to the now-ubiquitous cybersecurity and cloud-based technologies that abound, the new methods shaping the audit of the future include:

 

      • Artificial Intelligence (AI) and Big Data: AI includes automating tasks that were typically performed by humans, such as preparing a tax return or financial statement. With AI, CPA firms can streamline audit processes leading to new ways to service clients.
      • Data AnalyticsAI and big data – large, complex sets of data that require specialized methods and technologies to analyze them – are making data analytics more relevant and important in the audit process.

        The AICPA defines data analytics as the science and art of discovering and analyzing patterns, identifying anomalies and extracting other useful information in data underlying or related to the subject matter of an audit through analysis, modeling and visualization to plan or perform the audit.Auditors normally use sampling techniques to test a small portion of a population and the project conclusions across the entire population. Theoretically, the use of data analytics would allow an auditor to test 100 percent of a population, which would lead auditors to the areas of greatest concern. According to the AICPA, the use of data analytics can enhance traditional audit procedures, contribute to every phase of the audit, and offer a new way of visualizing and analyzing results.

      • Blockchain: According to Blockchain for Dummies®, “Blockchain is a shared, distributed ledger that facilitates the process of recording transactions and tracking assets in a business network. An asset can be tangible — a house, a car, cash, land — or intangible such as intellectual property, such as patents, copyrights, or branding. Virtually anything of value can be tracked and traded on a blockchain network, reducing risk and cutting costs for all involved.”

        While Blockchain is gaining more and more attention, there are still many hurdles the process must overcome, and the Blockchain of today most likely will be much different from the Blockchain in five years.

Innovating traditional services

The audit as we know it is on its way to becoming a commodity – and some would say it already has. The traditional audit is backward-looking reporting on information that management has already analyzed time and time again, often several months after the fact.

Firms must find ways to innovate the traditional audit process by leveraging big data, using data analytics to create efficiencies and predictive capabilities, and moving to virtual/continuous auditing. This will allow the profession to reinvent the audit into a service that is real-time, forward-looking and predictive to provide real value for clients.

To assist firms in modernizing traditional audit approaches, the AICPA is working with Rutgers University on a project called the RADAR Initiative to further integrate the use of data analytics into the audit process. There’s also the RIVIO Clearinghouse, which will allow CPA firms, private business and third parties, such as financial institutions, to more securely and efficiently exchange information. (Previously only public companies had access to the SEC’s EDGAR, a secure network, to share information with stakeholders.)

Creating New Services

As traditional services run the risk of becoming outdated, it is up to accountants to create innovative new service offerings to drive value for our clients. The AICPA recently rolled out one such service – a cybersecurity reporting framework. The framework, according to the AICPA, will provide organizations with a common language to use when evaluating and reporting on their cybersecurity efforts and gives them a level of comfort that they’ve adequately considered best practices when designing, implementing and operating programs.

The accounting industry is in an age of unprecedented change. As I recently learned at the AICPA’s annual conference, “It is up to us to disrupt ourselves.”

About Ericksen Krentel

Ericksen Krentel CPAs and Consultants, founded in New Orleans, Louisiana in 1960 with offices in New Orleans and Mandeville, believes that serving as the clients’ most trusted adviser is grounded in going beyond the numbers.

That includes helping clients achieve their business and personal financial goals by providing innovative and exceptional services in the following areas: audit and assurance services, tax compliance and planning, outsourced CFO services and business valuations for a variety of industries; employee benefit plan audits; fraud and forensic accounting; business planning; IT consulting; loss calculations; and estate planning.

Learn more at www.ericksenkrentel.com.

Related Blog Posts

Hurricane Ida Update

Our thoughts and prayers are with all of the people affected by Hurricane Ida. Ericksen Krentel team members have spent this week checking in on each other, our families, and our clients to ensure that everyone is in a safe position. Our New Orleans and Mandeville offices are currently closed due to power outages. We expect our Mandeville office to re-open shortly and will post the status updates of both offices on our website and social media as we know more details. We will do our best to assess the situation of our clients and people, and intend to return to each office as quickly as possible.
We have learned through our experience with past disasters and the ongoing pandemic to be adaptive to new technologies and have implemented cloud-based applications that allow us to efficiently operate remotely. In the interim, we are available to the extent that is possible in working remotely with our many affected clients and their personnel.
As recovery operations begin to take shape and progress, please do not hesitate to call on us to assist in your financial, tax, and other needs. You can reach your Ericksen Krentel professional directly through their normal email address or if you need immediate assistance, send a message through communications@ericksenkrentel.com to receive a return call from one of our professional team members. We look forward to a complete recovery and once again working directly with our clients.

What to Know About Restaurant Revitalization Grants in the Rescue Plan Act

As the COVID-19 pandemic and its economic devastation continues, the $1.9 trillion American Rescue Plan Act of 2021 (ARPA), which was signed into law March 11, 2021, expands relief provisions first introduced in the Coronavirus Aid, Relief and Economic Security (CARES) Act from March 2020 and introduces new measures to help businesses and individuals.