Innovating and evolving our audit approach
In addition to having the right policies and procedures for quality in place, we are innovating in the delivery of the audit itself.
In addition to having the right policies and procedures for quality in place...
Delivering through our current audit workflow
The current KPMG audit workflow is enabled through eAudIT, an activity-based workflow and electronic audit file. eAudIT is KPMG’s audit documentation workflow that allows professionals to complete quality and consistent audits. eAudIT integrates KPMG’s audit methodology, guidance and industry knowledge, and the tools needed to execute and document the audit work performed.
eAudIT can be ‘scaled’ to present the relevant requirements and guidance, depending on the nature of the entity to be audited and in accordance with professional standards and applicable legal and regulatory requirements. It provides direct access to our audit guidance, professional standards and documentation templates.
Updating for the future
While our current audit workflow and methodology are robust and consistent with all auditing standard requirements, the updates we are making to them will enable us to continually drive audit quality and consistency upwards and provide us with the platform to build in continuous enhancements as the power of new technologies develops.
We have laid the platform for this already with the launch of KPMG Clara in 2017.
Audit solutions for today’s world
We recognize that in order to deliver quality audits, we must continually evolve and develop our technology solutions to keep pace with today’s digital world.
That is why we have embarked on a process of reimagining our audit platform, workflow and methodology to provide enhanced consistency and support to our audit engagement teams, deliver more detailed insights to our clients, and future-proof our systems for the expected continued development of new technologies such as robotic process automation, machine learning and cognitive technologies.
This process began in 2017 with the launch of our smart audit platform, KPMG Clara.
The continuation of this process will see a new workflow and methodology embedded into KPMG Clara. There has already been a limited deployment during 2019, with full deployment globally starting in 2020.
The KPMG Clara workflow limited deployment is an important milestone in KPMG’s journey to innovate, digitalize and transform the audit experience for our people. Like all new technology solutions, the new workflow will continue to evolve and grow, and feedback from engagement teams will be used to make improvements going forward.
It is a significant investment that underlines our commitment to audit quality, consistency and sophistication.
Bringing consistency through our methodology
Our audit methodology, tools and guidance are:
- globally consistent and fully compliant with the applicable standards, including International Standard on Auditing (ISA), Public Company Accounting Oversight Board (PCAOB) and the American Institute of CPAs (AICPA) and are supplemented to comply with local auditing standards and regulatory or statutory requirements by member firms
- inclusive of KPMG methodology interpretations that drive consistency in areas where the applicable standards are not prescriptive in the approach to be followed
- centered on identifying risk, focusing on risks of material misstatements and the necessary audit response
- made available to all KPMG audit professionals and required to be used, where necessary
- applied even where local auditing standards are less demanding than the ISAs.
The audit methodology developed by KPMG Global Solutions Group is based on the requirements of ISAs as well as the auditing standards of PCAOB and AICPA. The KPMG audit methodology is set out in KPMG’s Audit Manual and includes additional requirements that go beyond the ISAs, which KPMG believes enhance the quality of the audit. The audit methodology emphasizes applying appropriate professional skepticism in the execution of audit procedures and requires compliance with relevant ethical requirements, including independence.
Enhancements to the audit methodology, guidance and tools are made regularly to be in continuing compliance with standards, emerging auditing areas of focus and audit quality results (internal and external). Key topics include risk identification, assessment and response, accounting estimates, group audits, and audit sampling.
KPMG firms may add local requirements and/or guidance in the manual to comply with additional professional, legal or regulatory requirements.
Bringing it all together in KPMG Clara
The launch of KPMG Clara created a smart audit platform that brings together our audit Data & Analytics (D&A) capabilities, innovative new technologies, collaboration capabilities and audit workflow.
This represents our ambition to:
- transform audit execution for our people and clients through new, modern technology-enabled interfaces and collaboration functionality
- integrate the required capability to digitize the audit and deliver new D&A routines
- enable an enhanced and redesigned workflow
- incorporate the development of monitoring capabilities at the engagement level and across engagement portfolios for use by engagement teams and member firms
- support global leadership’s monitoring of the effectiveness of member firm systems of quality control
- develop an extendable audit platform to enable member firm customization and scale, as well as future capabilities.
KPMG Clara also encompasses the tracking of selected engagement-level indicators by audit teams for an individual engagement and across an engagement portfolio. This provides a summary and visualization of these indicators to:
- measure audit engagement progress and foster timely issue resolution
- facilitate audit execution by providing key indicators for prioritizing tasks
- highlight unexpected results/relationships that may require further investigation.
The KPMG Clara platform is built to be scalable. We will continue to enrich it over time as technologies continue to emerge and transform the audit, with areas like cognitive and predictive technology being channeled through KPMG Clara to deliver ever greater capabilities. Through alliances with some of the world’s most advanced technology companies such as Microsoft, we are building the future of audit, aligning with technology leaders to bring new insights faster and, with growing capabilities, deliver even more value. KPMG’s investment strategy also includes working with universities on important applied audit research and with member firms as they develop advanced technologies.
Creating the new KPMG Clara workflow
The new KPMG Clara workflow will be used by our audit teams to execute and document KPMG audits. It will guide audit teams through a series of steps in a logical sequence aligned to the standards with a clear display of information and visuals, knowledge and guidance available at the moment of need, and with embedded advanced D&A capabilities. The workflow and methodology will also be scalable — adjusting the requirements to the size and complexity of the audit engagement. This globally driven project will significantly enhance the execution of an audit by KPMG professionals and drive improvements in audit quality.
KPMG Clara workflow incorporates monitoring capabilities (e.g. data mining) at the engagement level for use by member firms. Once the KPMG Clara Workflow has been fully rolled out, the predecessor audit workflow tool, eAudIT, is expected to be decommissioned (in our 2021 fiscal year).
Strategically embedding the use of data through Data & Analytics (D&A)
KPMG Clara also allows us to more seamlessly build D&A capabilities into our audits. D&A is central to interrogating and analyzing vast quantities of data. This takes the power and reach of an audit far beyond the traditional capabilities of the past.
KPMG’s audit, powered by D&A, is designed to:
- enhance audit quality, by providing a deeper understanding of data populations, giving focus to higher risk transactions
- be secure, by restricting access to data both in transit and within KPMG’s IT environments
- be transparent, by facilitating detailed analysis to uncover the reasons behind, and root causes of, outliers and anomalies and provide increased visibility into higher risk transactions and process areas.
D&A capabilities and routines are built on principles and professional standards underlying an audit and do not relieve auditors of their responsibilities.
Current capabilities in this area facilitate the performance of planning and risk assessment activities and substantive procedures, and include capabilities that:
- enable the analysis of account balances and journal entry data
- automate ‘period on period’ balances comparison and ‘time series’ evolution information
- enable the analysis of sub-ledger, transactional data over certain business processes and accounts.
Together with our KPMG Clara platform, we are significantly investing in D&A capabilities and paving the way for the increasing use of emerging technologies such as robotic process automation and machine learning — which will take the power of technology applied in the audit to an even greater level.