I strongly believe that you either follow progress, or you “die” standing still. Therefore, let me state my opinion from the beginning: The audit profession needs to move forward, evolve.
There is a debate going on for a number of years now, over the future of Audit.
This is mainly due to a rise in the criticism to audit Firms for an alleged failure in exercising their duties which in my opinion is the main factor that has trigger the debate. So, let me state another firm belief: the audit profession is here to stay. What auditors need to do is to grow the profession and with this, enhance the service they provide.
I am not going to try to reinvent the wheel here, or say something spectacular! My view is nothing new to the world, but what strikes me as odd, is that still so many do not get the point… Where man fails, or rather finds it difficult to cope, technology provides the solution!
The international standards of auditing focus on guiding the auditor to identify audit risks and to design audit procedures to mitigate those risks. However, we see more and more cases where the auditor either failed to identify all risks, or the audit procedures designed were not sufficient to discover material errors. So, what is the issue here? Of course the issue is not that auditors have suddenly become bad or inefficient in their work. What has changed is that regulation has become more demanding, companies have more responsibilities and obligations, and greater risks of failing to be in line with them. Thus, the software packages that companies use, and the internal procedures they must put in place to be in line with their responsibilities and obligations have become more complex and demanding. What has not changed, or rather evolved, is the design of the audit procedures that are used by the auditors, to identify misstatements.
Over the past years, we see that software is being developed to assist the auditor. This software is focused in two areas. Firstly, the review of the transactions of a company, with a comprehensive analysis of the detailed ledger, in an effort to identify unusual transactions or trends. Secondly, they focus in what the auditor always tries to keep away from, and this is more testing, by using algorithms that can practically test 100% of a sample area, and return all kinds of results. One could argue that the auditor could become obsolete, but this is not the point of discussion here. Nevertheless, in my opinion, the auditor will always have the most important role as he/she is needed to filter any result that an algorithm returns by using logic and professional judgment. Therefore, to return to my original argument, the point I am trying to make is that the auditor needs to use the tools that technology provides, to develop its procedures, in order to be in line with times.
Despite the benefits that this approach can have in the profession, we see that audit firms are still reluctant in implementing such software in their audit methodologies. The most common reason used is that the cost of such an application is not affordable. This can be true is some cases, but when will man learn that change or progress never makes financial sense? Bottom line is that if you do not invest in new technology and you do not follow progress, you are bound to fail and disappear.
What will the audit firms decide to do? This is something to be seen. Baker Tilly believes in this change, and is moving towards technology more and more. These are exciting times for us, as progress is bound with our mission to offer the highest quality of services to our clients. And as Chuck Berry says in one of its songs, “(you) can't stop the train, gotta let it roll on”, and in this case, you cannot stop progress, you have to go along..!
Author: Mr. Moisis Aristidou - Director at Baker Tilly in the Audit and Assurance Services - [email protected]