Our chairman, Shariq Contractor, recently spoke at the conference of the Eurasian Forum of Accountants and Auditors held in Baku, Azerbaijan.
It was a platform for Accountants and Auditors from Euro-Asia region to come together to discuss contemporary challenges faced by the Audit profession. This article is based on Shariq Contractor’s presentation.
When asked whether robots will take over the audit profession, Oxford University gives it a 94% likelihood. While this percentage is rather low, especially compared to other industries, it does call for some serious reflection.
Furthermore, a recent Forbes Insights survey found that 58% of auditors and businesses believe technology will have the single most significant impact on the audit process over the next three to five years. And, by 2020, smart machines will be a top-five investment priority for more than 30% of chief information officers.
What Does This Change Mean for Audit Professionals?
Most experts agree that this technology revolution will be mostly positive for organisations that employ auditors. It will transform companies and allow auditors to conduct a more in-depth, sophisticated data analytics.
As intelligent machines become increasingly sophisticated, auditors will be able to make more meaningful connections, identify patterns, form correlations, and find unique solutions to client problems.
With digital technology transforming our society and lives, we now have access to un-imaginable essential data. The internet of things (IoT) allows Big data to be captured and analysed in ways not possible a few years ago.
Access to more meaningful data means companies will expect a higher standard and more insights when it comes to audits.
Data analytics will allow auditors to quickly understand the accuracy of the reported information and then increase the quality of their audits.
While this may sound good, the data revolution isn’t without its challenges. Auditors will need to test whether third-party data is reliable, relevant, objective, accurate, and comply with auditing standards.
What Technology will Disrupt Audits?
Data analytic tools like AI and Blockchain will undoubtedly impact the audit profession. However, we also expect to see some disruption from technology like Facebook and cryptocurrencies.
Blockchain is a decentralized, distributed ledger that enables recording and verification of transactions. It provides unmatchable security through encryption, as once transactions are entered, they’re impossible to change.
Blockchain was initially developed to support cryptocurrency. But it has since evolved to support technology like ‘smart contracts’ and has the potential to impact all recordkeeping processes, including the way transactions, are initiated, processed, authorised, recorded and reported.
The mechanism under which blockchain works may be referred to as consensus algorithm. When one participant wants to send value to another, all the other nodes in the network communicate with each other using a pre-determined mechanism to check that the new transaction is valid. However, blockchain technology is still emerging and has not yet been proven at enterprise scale. However, if these limitations are resolved then it has the potential to assure the integrity of financial records, which could ultimately even eliminate the need for audits.
Facebook & Libra Cryptocurrency
Facebook recently announced a brand new cryptocurrency known as Libra, which is powered by blockchain technology.
This has invoked widespread support and prominent brands like Uber, Visa, Vodafone and Spotify, have partnered with Facebook to encourage Libra’s adoption and acceptance.
Cryptocurrency systems must also include digital wallets. Libra’s digital wallet is known as Calibra and it’ll be accessible through Facebook Messenger, WhatsApp and a separate stand-alone app.
Facebook’s Libra cryptocurrency serves as a further example of the need for auditors to develop and deploy advanced technologies. Only through understanding the latest tech can auditors harness data and unleash crucial insights to advance audit quality.
How the Audit Profession Can Respond
Test checking is likely to be replaced by 100% verifications in audits as computers are now capable of going through voluminous data and throwing up outliers. It may also be possible to do audit on real time basis. The regulators world over will have to recognise this and make suitable changes or even overhaul the auditing standards to accommodate this changing reality. We need to embrace this change and incorporate it into our practices to ensure we remain relevant and continue to deliver outstanding service. As George Bernard Shaw said, “progress is impossible without change and those who cannot change their minds cannot change anything.”