The Cutting-Edge Technology Revolutionizing Auditing: Exploring Innovative Tools and Techniques

In the pandemic, there was an initial rush to create hybrid and remote work environments. Cutting-edge Technology, Auditing, and Innovative Tools have taken over. These days most business leaders are rightly focused on business continuity and employee safety. Cutting-edge Technology, Auditing, and Innovative Tools can help. For many, shifting to remote jobs provided surprising options among the challenges.

KPMG and Cutting edge technology 

“Auditing is about proof and validation where people have traditionally needed to check findings firsthand, but now technology has started to change that model,” says Lau Trebinaka, Audit Chief Technology Officer for KPMG LLP.

Below, Trebinaka shares examples of game-changing technologies pushing some of the profound changes in the modern audit.

1. Analytics And Automation in auditing

Much of any audit is a slow process of collecting and sifting through enormous data. This is innovative, making data extraction a major component that can change across companies and fields.

“In the auditing field, so much time is expended ‘reading,’ like the legal profession,” Trebinaka explains. This can drain much-needed resources from various parts of the process.

Enter advanced auditing tools. Powered by adaptable artificial intelligence also, machine learning, and much different automation technologies. The most innovative technology is changing how audits are done.

Document readers, for instance, can scan through tons of line items and quickly flag potential inconsistencies. They may also cross-reference divergent data groups according to predetermined standards.

These innovative tools free up time and resources for more important work. That is a human-based analysis for a better focus on areas of increased risk.

 Automating data extraction lets auditors provide analytical value and insight.

2. Blockchains And Smart Contracts

Blockchain is an innovative tool. It is, if oft-misunderstood, technology. This cutting-edge technology that’s already relevant to the audit industry.

The source of auditors’ love for blockchain should be obvious. Companies are using the cutting-edge technology network as a transparent, immutable, safe, and decentralized way to record assets and dealings.

Indeed, smart contracts (applications held on a blockchain that run according to preset conditions) have already shown to be capable of facilitating massive amounts of client transactions.

Of course, auditing deals recorded on blockchains comes with some challenges. Auditors need reliable cutting-edge technology to access data recorded on blockchains as well as innovative tools to validate clients’ wishes about their control over private keys. In addition, some digital assets recorded on blockchains, for instance, nonfungible tokens (NFTs), may be hard to value.

KPMG believes that solutions to the newer challenges require specialized investments in data and innovative tools to obtain audit evidence for cutting-edge technology. That’s why the firm built Socialess, a patented suite of capabilities that help KPMG teams solve their challenges and help their clients.

“Socialess is enabling KPMG to give audit services to leading financial entities and crypto natives,” said Robert Morris, partner, Audit at KPMG. “The ability to obtain audit data about balances and transactions noted on leading blockchains helps everyone continue to deliver high-quality work that satisfies regulatory standards.”

Socialist is just one of many blockchain-innovative auditing tools that will further better the audit in the coming years.

3. Virtualization

Finally, the most remarkable aspect of the modern audit may be the impending virtualization.

To remain relevant and adaptive, one way the audit evolved at KPMG because of the covid time was to create “virtual audit rooms” to show the virtualization needed. Virtual audit rooms are secure, safe, shared digital environments where people can safely access financial documents and other sensitive documents. Under the burden of recent circumstances, they have moved from dream to practicality. Thanks to earlier investments, KPMG changed its processes to include virtual audit rooms during the pandemic.

To help ensure virtual audits are as reliable if not more than their face-to-face analogs. Thus, KPMG has also incorporated smart glasses. These glasses allow auditing professionals to interact with remote assets securely and in real-time on-site, such as with inventories, etc.

In other regards, the virtual audit room looks like a traditional on-site operation. The digital space is “open” all day, permitting real-time and full-time teamwork on an around-the-clock basis for audit teams.

“It allows us to do virtual reviews of things as if we were sitting side by side in person,” Trebinko says.

The Future Of Virtualization

Looking ahead, will the audit turn into a fully virtualized process without any person-to-person interaction between auditors and their customers? Doubtful, says Trebinko. Already, he says, audit committees are saying, “When are you going to go back to being in office?”

Instead, just as the future of work is going to be hybrid, so too will the modern audit. And that’s no coincidence.

“We are really a reflection of the client in many, most ways,” Trebinko says. “We have to navigate the rise and fall, the infrastructure and the beliefs of clients to help ensure we are getting a great audit done—quality-terms, time use.”

As markets change and businesses evolve, so must the audit. The use of cutting-edge technologies such as advanced analytics, changing artificial intelligence, and virtualization. All of which help companies boost productivity, efficiency and deliver a better audit experience.

Internal Audit

Internal audit is undergoing a period of significant change, and nowhere is this more evident than in the IT audit space. Technology now touches on almost all areas of business operations, creating both opportunities and challenges for corporate governance departments.

Global IT spending is expected to grow 3.7% in 2020, with expenditure for this year set to reach $3.7 trillion, according to Gartner. Data analytics, artificial intelligence (AI), machine learning, robotic process automation (RPA), and the cloud are just some of the emerging technologies that are revolutionizing many industries.

Amid this backdrop, the C-suite has increasingly sought greater insights from auditors, with hopes the profession can become trusted advisors to the business and take a more proactive role in predicting technology risk.

Auditors are stepping up to the challenge. A recent global survey from Protiviti revealed three-quarters of departments are embarking on some form of innovation or transformation initiative. In this article, I’ll explore the impact these changes are already having on internal audit and IT audit recruitment in New York and beyond.

Emerging technologies on the rise

Protiviti’s research indicated that next-generation audit capabilities are still in the early stages, but here at Barclay Simpson, we believe 2020 could be a breakout year for emerging technologies, particularly data analytics.

Our 2019 Internal Audit Market Report revealed 80% of audit teams are already using data analytics and AI tools in some form. Of these, 82% say these technologies have led to improved audit findings, with nearly six out of ten respondents also claiming they have cut costs.

How to do these analytics work?

Analytics work is commonly split into three groups: descriptive, predictive, and prescriptive. Or, put simply, ‘What happened?’, ‘What will happen?’ and ‘How can we make it happen?’ respectively.

Predictive and prescriptive processes are typically considered advanced analytics, which is less common in companies than in more basic forms. The Protiviti figures show less than a quarter of audit departments use advanced analytics, although up to four-fifths have plans to adopt such practices within the next two years.

Advanced analytics appear to be delivering compelling results for the majority of adopters. Half of respondents said analytics was a high-value technology, with a further 27% claiming it offered medium value. According to Protiviti, the most common uses of advanced analytics are to:

  • Enhance coverage (36% of respondents);
  • Drive efficiency (30%);
  • Identify unknowns (30%);
  • Provide continuous auditing (26%); and
  • Review risks in real-time (25%).

Machine learning and AI, RPA, and process mining are also increasingly prevalent in audit departments. All of these technologies are planned for adoption by two-thirds of businesses or more within the next two years.

Clearly, audit departments are placing greater emphasis on transforming their technological capabilities, but are these changes delivering results? This typically depends on how sophisticated audit functions are at embedding innovation into their frameworks.

Becoming a ‘digitally fit’ audit function

A recent PwC report highlighted the importance of having a ‘digitally fit’ audit function. My colleague Russell unpacked the insights from this research in an article a few months ago, which you can read here.

Digital fitness was measured in two ways:

  1. Having the right skills and competencies in place to provide strategic advice to stakeholders and offer assurance regarding digital transformation risks; and
  2. Changing the internal audit’s own processes and services to ensure the function is technologically capable of aligning with the organization’s strategic risks and responding appropriately.

The report separated internal audit departments into three categories based on key digital fitness metrics:

  1. Dynamics: The most digitally fit teams (19% of firms);
  2. Actives: Businesses taking the necessary steps towards digital fitness (27%); and

Beginners: Those in the very early stages of technological progress (54%).

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