Technology and audit – a powerful future
Technology and audit – a powerful future
On the path to transparency and trust, organisations are seeking assurance over more than the numbers. Auditors are embracing new technologies to provide deeper insights and analysis, but they must bring a critical mindset to every technological innovation.
Technology promotes business efficiency, accelerates time to market, and offers more connection points to customers than ever before. With this innovation comes increasing stakeholder expectation for more accurate, timely and relevant information on the businesses performance, as well as assured corporate reporting.
And as companies become more transparent in disclosing their strategies, performance and outlook, they are asking auditors to not just assure the numbers, but other KPIs such as employee retention, or social and environmental impact, for example.
Technology is a core enabler of this transparent approach. However, as auditors and reporting specialists, we must both embrace the opportunities of technology, and stare it questioningly in the face.
To help organisations continue to grow their integrity, and in turn their trust from stakeholders, we must ask, where did the machine get its ‘thinking’ from? This helps to ensure the quality of data input, the discovery of anomalies, mitigation of risks, and thinking differently about what the technology could help us discover.
Quality of information
High quality corporate information and reporting is fundamentally dependent on the integrity of the data provided. This is not a simple task – KPMG research shows that one in four C-level executives in Australian organisations do not trust the way their own organisation uses different types of analytics.
There is a need for reporting teams to ensure a high standard of data input, and for auditors to have a deep understanding of where the data comes from, and how accurate it is.
At KPMG, we have developed assurance technology that helps us go beyond traditional financial audits, to drive the deeper and broader insight that organisations need, and stakeholders now expect.
Our data and analytics tools – from traditional to predictive – and our cognitive and Artificial Intelligence (AI) tools, are designed to help ensure the information that is collected and shared is accurate.
For example, our online and interactive platform KPMG Clara offers visibility to clients over their audit, while we communicate with them in ‘real time’ as we conduct it. This collaborative approach enhances our ability to share greater and more relevant insights that can help to ensure the accuracy of the information – leading to stronger assurance.
Finding anomalies and insights
A core part of auditing is finding any outliers that could impact a strategy, or insights that could question the integrity of the reported information.
Years ago, to achieve this, we would look at entire sets of manual journals for unusual trends, like who was posting late at night on weekends, or journals that didn’t appear legitimate.
Today, technology helps us see early signs of anomalies across financials as well as other KPIs. We can more quickly find the ‘unusual’; freeing our auditors and clients to focus on the ‘why’ and not the ‘where’.
We can use technology to digest entire data sets across large organisations, helping them to see which locations around the world are following processes, which are not, or which processes are redundant. This gives insight into company culture and the challenges faced in adopting new processes and technologies – again leading to stronger assurance.
In today’s disruptive world, risk identification and mitigation is expected by stakeholders.
Traditionally, each risk was rated from high to low, focusing on: how likely it was to occur, and the likely magnitude of the impact.
However using technology, we wanted to better capture how risks are interconnected, and to help organisations track this. We merged traditional economic network theory with our own IP, and created a platform to ‘connect the dots’ on risk – known as Dynamic Risk Assessment (DRA).
We are set to release DRA to clients, so they can form a ‘lite version’ themselves. We will also make it available on Clara to be used in different assurance engagements.
As cognitive technology and AI keeps evolving, the potential for its role in assurance increases. Self-learning systems that use data mining, pattern recognition, and natural language processing to simulate human thought processes can all play a role.
In our alliance with IBM Watson, we are starting to integrate machine learning and other AI technologies with KPMG’s assurance methodology. While at an early stage, we have already deployed Watson for assessing credit risk, and used it to check that corporate reporting disclosures (words, not just numbers) meet regulatory requirements.
Drones and sensors next
To push even further with integrity of information and reporting, we are working with drones, Internet of Things (IoT) and sensor technology to provide information on processes or operations in real time.
For example, we are trialling the use of drones at storage and inventory sites, searching for obsolescence, and combining data and analytics (such as our process mining tool) to give our clients insights into entire sales and procurement cycles.
A key use case underway combines sensors/IoT devices with a closed blockchain to assess how we can provide assurance around product providence in the agriculture and trade industries.
Freeing up human thinking
Despite the myriad benefits and future potential of technology in auditing and assurance, we can never assume that the ‘computer knows best’.
As good as ‘bots’ are, as auditors, we must always understand what they can and cannot do, and always question the accuracy of information input. Did the machine pick up expected anomalies? Has it highlighted any potential risks? Are there more ways, such as with drones, or using IoT that we could get further insights?
As auditors, and the organisations we work with, embrace these benefits of technology for assurance, we must bring even deeper experience into the challenging and qualitative factors that arise. While technology is an evolving enabler of even stronger assurance, auditors play a vital role.
Stakeholders expect the same level of assurance across all KPI’s that they get from company financials. This means the role of external auditors remains vital. Find out why in Credibility and trust.
We explore how corporates can maintain and rebuild trust – the strategies for designing and aligning organisational infrastructure to engender trust.
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