Chair of Kreston Global Audit Group and Audit and Assurance Director at Kreston Ioannou and Theodoulou
Theo is a non-executive board member of the Cyprus Securities and Exchange Commission (CySEC), and leads the Audit Committee of CySEC. In 2018, he was appointed as the Finance Director of one of the biggest football clubs in Cyprus, Anorthosis Famagusta (Football) Public Limited.
Theo’s portfolio covers M&A due diligence, investment appraisals, forensic audit, internal audit and risk management advice, as well as corporate governance best practice.
Audit data and technology
May 26, 2022
If you are interested in technology, you’ll know that numerous big themes are colliding with business to transform the way work is done. Themes like artificial intelligence (AI), natural language processing and blockchain to name a few.
Audit is no exception to the shake up and, starting with the Big Four and working down to smaller firms, we are starting to see impactful ways in which technology is improving the process of audit. Here’s a look at a few examples, as well as an exploration of the risks.
Artificial intelligence is perhaps the most obvious use of technology in audit. Firms are already deploying it to rapidly analyse large volumes of data. They can do this more quickly and more accurately than human counterparts.
Artificial intelligence and audit
One of the goals of AI technology is to move away from sampling and be able to look at whole datasets. As you can imagine, this makes for a more thorough audit.
The fear with all technology is that it makes human input redundant, but that does not have to be the case. On the contrary, very often it frees up skilled people to perform higher value work, such as judgement-based tasks informed by superior data.
When adopted, this can help audit departments with recruitment and retention, as they strip out some of the more frustrating or mundane tasks associated with audit and offer more challenging and rewarding careers.
Natural language processing and machine learning
Natural language processing and machine learning are sub-strands of AI.
Natural language processing refers to computers understanding and interpreting the flow and rhythms of speech. We are seeing it used to review batches of contracts for key terms which the AI can summarise and then feed into the audit for analysis far more efficiently than humans.
Machine learning refers to computers being able to teach themselves and develop ever more sophisticated understanding of datasets.
In some audits, machine learning programs have proven better at finding anomalies than the traditional human-led approach. This greater accuracy means that fewer false-positives need to be investigated and more time can be spent on real anomalies.
Challenges of technology in audit
Major changes like the sweeping introduction of technology require careful implementation. Smaller firms may feel safer letting larger ones be the pathfinders, with their bigger budgets and capacity.
There is also a danger, and one that regulators will be particularly interested in, that a disconnect occurs between human auditors and AI programs – that people simply won’t understand what the computers are looking at, or how they are operating.
It is important to guard against this as technology is rolled out, so that human auditors can always be accountable for the automated processes they oversee.
Blockchain is another technological theme that will disrupt audit. Records put on it may be public, permanent and immutable, in theory taking away some of the need for audit. While this may seem like a threat – as with many other aspects of technology – it is instead important to see how it can empower auditors of the future to provide an even more rigorous service.
Firms may need to review their charging structures as technology becomes more tightly woven into their service. If profits are tightly aligned to billable hours, heavy use of technology may erode profitability while improving service. To counter this it would be wise to explore alternative pricing models that reflect the new nature of the work and the value it provides.
To find out more about technology and audits, get in touch with us today.