Developments in artificial intelligence (AI), data analytics and blockchain technologies are having a significant impact on businesses.
The pace of technological change is particularly affecting the finance function, creating a need to revisit the audit approach.
A recent seminar jointly organized by the Institute of Chartered Accountants in England and Wales (ICEAW) and the Dubai Financial Services Authority (DFSA) looked into the impact of technology on the audit and finance profession.
Firstly, the event highlighted that technology will drive down the time to conduct an audit, as testing becomes more automated and is conducted in real-time. Traditionally the audit approach was a combined risk assessment using substantive sample testing and assessment controls. Now with improved technology, it will be possible to test the full population of entries and not only a sample.
The profession will move away from asking ‘what could go wrong?’ to ‘what has gone wrong?’. There will be more certainty and precision with regards to the transactions, and more transactional evidence of control weaknesses.
Views were expressed around the need to develop new methods for calculating audit fees based on the technological resources used in the process and the value added by audit teams who derive insight from the data.
There will be opportunities for the firms to develop more forward-looking assurance services, helping clients to manage risk and growth. This is to mean, technological advances have the effect of commoditizing the audit by making the auditors run for their businesses and making the profession a business.
Technology is directing changes in the way clients run their businesses, changing their business models and processes. Auditors need to stay ahead of these changes in order to provide relevant advice and support services. One way to respond to this is that businesses or audit firms can both recruit and partner with a variety of technology experts.
Distinctively, audit firms need to invest in digital initiatives, including AI, blockchain, cyber security and developments in data capabilities.
These initiatives across multiple technologies, will equip them to expand their assurance services to deal with the new technology driven risks that their clients face and safeguard their digital assets.
While it is clear that lower level accounting and auditing skills can be replaced easily by technology, human business acumen and communication skills remain crucial. The required combination rests in a blend of human capital resources, incorporating specialist technology and digital skills, technical accounting and audit skills and professional skills such as communication, leadership and commerciality.
While we are clearly on the cusp of a changing professional landscape, it remains unclear exactly where the digital revolution is heading and regulators are grappling with how best to regulate these markets. In the interim corporates (businesses), professional membership bodies, professional service firms need to engage with technological developments and respond to the benefits, risks and opportunities they bring.
(The author is the FCA and ICAEW- Regional Director for the Middle East Africa and South Asia (MEASA))