Three Key Technologies Affecting The Audit Profession
Technology in Audit Engagements
Technology in the contemporary world is advancing very fast, making it nearly impossible for organizations and professions to keep up with the current trend. The technology focuses on making life more comfortable and improving quality of life through ensuring efficient and effective operation. Unlike other professions in the world, the audit sector is feeling and will continue to experience the impact of technology in one way or another. Technology advances will determine future audit engagements. In this paper, we will discuss the three key technologies affecting or threatening to change the audit profession and the disruptive potential of the technologies.
Furthermore, we will discuss whether the technologies have the potential to replace human auditors. Based on the impact of the technology of the audit sector, we will recommend the best technology that the organization in our case study should adopt. Technology is here to stay, and it will affect various aspects of human life. Business organizations in multiple industries have to acknowledge technology advancement and be flexible and agile in responding to technological change. Technology may seem to threaten human labor, but even the most autonomous sophisticated technology will, at some point, require human input. Therefore, technology will disrupt the audit profession, but it will not replace human auditors entirely.
Three key Technologies affecting the Audit Profession
Information technology has become an essential element in every business organization and industry. IT has led to the development of sophisticated, effective, and efficient technologies that change how auditing is done in the contemporary world. These technologies will continue to shape the auditing landscape soon. Necessity will allow auditors to use technologies that enable data gathering and analysis of more significant samples. There are several technologies incorporated in the audit profession, but the magnitude of impact varies from one technology to another.
The three key technologies affecting the audit profession include artificial intelligence, machine learning, and blockchain technologies. Artificial intelligence refers to the computing systems that demonstrate human intelligence qualities. Artificial intelligence involves several other technologies that are combined to exhibit human intelligence. The interlinked technologies engaged in artificial intelligence include sentiment analysis, machine learning, data mining, image recognition, and speech recognition. Machine learning technologies, on the other hand, consists of the capability of computer systems to interact with their environment and improve their functionality without human input. Machine learning uses the experience to enhance routine operations, thus improving the productivity and functionality of computer systems. Lastly, blockchain technology is essentially a digital ledge that captures the transactions of various parties within a network. Several blockchain technologies are developed and tested, but they all conform to the peer-to-peer, Internet-based distributed ledger architecture.
Artificial intelligence in Auditing
Artificial intelligence (AI) involves the incorporating of various technologies to produce computer systems that demonstrate human knowledge. Artificial intelligence technologies are affecting the audit sector in multiple ways, and it is foreseen to dominate the auditing operations soon. The development of artificial intelligence has created a fear of reducing the workforce in the auditing sector (Finamore and Dutta, 2014). Artificial intelligence will change the communication within the audit team. For instance, Artificial intelligence through interlinked technologies allows the simulation of the target audience. This will help team members in the audit team to rehearse presentations in virtual conference rooms and lecture halls before the actual performance. The preparation will improve how team member in the audit team can share ideas and concepts pertaining their day-to-day operations and projects.
Artificial intelligence will also support the auditors’ analytical procedures at various stages in the audit. Artificial intelligence technologies such as sentiment analysis, machine learning, data mining, image recognition, and speech recognition will improve data collection, processing, and analysis. For instance, machine learning allows a large number of arguments to be analyzed conveniently and within a short time compared to the customary manual review in auditing. Also, artificial intelligence algorithms are applied to identify material misstatements. The identification is achieved through machine learning, where categorizing the common and uncommon elements are used to identify exceptional ledger data (Kokina, and Davenport, 2017). Therefore, artificial intelligence has significant disruptive potential in the audit profession.
Auditor bias in decision making has been a significant challenge in auditing. Artificial intelligence through data mining and sentiment analysis is going to promote objective data analysis, thus eliminating the human bias in decision making. Machine learning also ensures rigorous analysis of data to provide precise conclusions that are used as the basis for decision making by the auditors.
Machine learning technologies in Auditing
Apart from machine learning contributing to artificial intelligence advancement, it has an individual disruptive potential in auditing. Machine learning will become useful in the development of applications and communication networks. Applications and software used by auditors to communicate within the department and with the external stakeholders will become more efficient and effective through machine learning. Machine learning will also improve the data presentation and display technologies, thus ensuring that auditors can easily share ideas and concepts.
Machine learning will also lead to a continuous improvement of the data collection, handling, processing, analysis, and storage. This is because the machine learning algorithms allow the auditing computing systems to interact with the immediate environment and automatically come up with the appropriate improvement to realize efficient and effective auditing. Furthermore, machine learning technologies will eliminate human bias in decision making. Machine learning allows the routine auditing operations to be synchronized, such that any slight deviation can be identified (Lokanan, Tran, and Vuong, 2019). This is important in auditing as it enables auditors to locate essential issues to be considered in the audit.
Blockchain Technologies in Auditing
Blockchain technology has made its way into the auditing process mainly through the famous Bitcoin introduced in 2008. Blockchain technologies, through the incorporation of cryptography and peer-to-peer network, allow two anonymous parties to transact without going through a trusted medium such as the bank. By eliminating the intermediaries, transacting parties significantly reduce the transaction costs as well as the time to settle a transaction. Also, blockchain technologies have introduced Bitcoin as a unit of account to be considered in auditing. New models and mechanisms have to be formulated and implemented by the Chartered Professional Accountants and Certified Public Accountants (CPA auditors) to ensure blockchain-based currencies are well audited.
Block chain technology through cryptography ensures that stored data is not modified. Hence, blockchain technologies can be used in auditing as an open, distributed ledger that efficiently and permanently records the transaction between two parties. Also, bock chain technology allows for verification in auditing since both transacting parties will have a copy of the ledger (Zikratov et al., 2017). Furthermore, blockchain technologies can be used to test the whole population of a transaction as opposed to the sample base substantive testing. This will improve the assurance in the audit engagements.
Technology and Human Workforce in Auditing
The technology advancement and adaption in the auditing sector have raised concerns among auditors. There are fears that automated technology will make auditors redundant soon. It is essential to acknowledge that technology will revolutionize the auditing profession, but that does not in any way imply auditors will be phased out. As a senior auditor, I would advise Savannah, who is worried about the impact of technology, that the auditors will not become redundant. Technology is going to improve the efficiency and effectiveness of the auditing operations to help auditors in decision making. Auditors need to understand the impact of technology in auditing so as adapt to their roles in the technologically advanced auditing.
Technology is essential in the contemporary business world as it helps business organizations to create and maintain a competitive advantage over competitors. As a senior auditor, I would suggest that our organization should incorporate technology in auditing engagement. Based on the above discussion, I would suggest that our organization should incorporate artificial intelligence due to the various advantages associated with it. Although it is challenging to integrate the emotional and intuition aspects in AI, automated technology will significantly improve the auditing operations and communication in the organization.
The impact of technology on auditing engagement is inevitable in the contemporary world. Business organizations in various industries have to acknowledge technology advancement and be flexible and agile in responding to technological change. Auditing companies should align their operations with the current technology trends to gain a competitive advantage over competitors. The three key technologies affecting the audit profession include artificial intelligence, machine learning, and blockchain technologies. These technologies will change how people auditors communicate, the analytical procedures, and reduce the influence of auditor bias in decision making. Although technology will revolutionize auditing, the auditing workforces will not become redundant. However, technology may change the scope and role of auditors.
- Finamore, E., and Dutta, K., 2014. Summoning the demon’: artificial intelligence is a real threat to humanity, says PayPal founder. The Independent.
- Kokina, J., and Davenport, T.H., 2017. The emergence of artificial intelligence: How automation is changing auditing. Journal of Emerging Technologies in Accounting, 14(1), pp.115-122.
- Lokanan, M., Tran, V., and Vuong, N.H., 2019. Detecting anomalies in financial statements using machine learning algorithm. Asian Journal of Accounting Research.
- Zikratov, I., Kuzmin, A., Akimenko, V., Niculichev, V. and Yalansky, L., 2017, April. Ensuring data integrity using blockchain technology. In 2017 20th Conference of Open Innovations Association (FRUCT) (pp. 534-539). IEEE.