5 insights on enhancing audit processes with technology
Technology is being embraced globally by audit firms. At Circit, we work with audit firms leading the charge and putting processes into action across teams. John Toon, Tech Strategy Lead at Beever and Struthers, joined us to discuss as part of a fireside chat during our recent webinar on ‘Enhancing Audit Processes: How Technology is Driving Innovation.’
Earlier this summer, John was interviewed by ICAEW in an article that was focussed on tech challenges and opportunities in audit. As a respected voice on this topic, John’s expertise and input were much appreciated during our fireside chat as well.
We covered five key topics: client expectations, team expectations, analytics, automations and Open Banking. Now that we are heading into the busy season, it has become more pertinent than ever to consider all these elements of audit, and how technology can aid, influence and advance them.
We have compiled the 5 key insights from each of the topics for audit leaders. The full webinar will be available to watch further down this page.
What is Open Banking?
Before we start, we wanted to reiterate what Open Banking is and what the implications are for audit.
Open Banking, or PSD2, has been around since 2016. The idea behind it is to increase the level of competition, innovation and security in the banking space, and move us into a more digitised way of doing things.
What is our role in this? Circit is an Account Information Service Provider (AISP) and we are approved directly by the Central Bank and Financial Conduct Authority. Under Open Banking, we can connect into banks themselves via API connections. This means we can provide instant access to balances and transactions, instilling higher confidence levels because cash balances can be confirmed and going concern assessed up to the moment of audit sign off.
Insight 1: Client expectations
Conclusion: Covid transitioned expectations of clients into a digital mindset where they increasingly expect to provide audit data in advance of the engagement. From Provided By Client lists to G/L data sets, audit firms can leverage the current shift as an opportunity to streamline operations, by engaging clients early and digitally.
John’s insights: “More and more clients have wanted us to engage on a digital level after Covid – they prefer that approach. Instead of a great big list of things required, they can deal with things in their own time.
Aside from that, there is a general awareness that analytics are becoming a part of the audit process. We are slowly but surely seeing clients engaging and asking us what our analytical approach to the audit will look like and what tools we are using. It’s good there are products like Circit available that can support us on the analytical side.”
Insight 2: Team delivery
Conclusion: Stakeholders within the team should be engaged early. The key question to answer before implementation is: “What does the team need to know and do?”.
New technology being introduced creates opportunities to challenge processes and identify new transformative resources, but ultimately, the focus should be on increasing audit quality. Technology can empower audit professionals to do the work they are qualified for, shifting their time away from manual tasks and giving them more room to focus on insights and advisory services for clients.
“When we saw Circit, we were blown away with what it could do. But, we had to step back and think about how to look at the process: who are the key people to get involved? How do we collate the information that we need and how do we get it into the system? How do we make the implementation as easy as possible? We engaged with our internal stakeholders (audit team, audit managers, partners) and we looked at how to improve things. We also didn’t stop after the implementation, we made sure to check in and continually reappraise.”
Insight 3: Analytics
Conclusion: Data analytics in audit is moving beyond visualisations in bar and pie charts. Firms, including Beever and Struthers, are pushing the boundaries of data analytics in audit. From hiring data scientists to leveraging Open APIs, these audit firms are focussed on client engagements to leverage client G/L data, cash transactions and documentation into data sets, all with the goal in mind to empower their teams to be more analytic and curious when focussing on what’s most important, audit quality.
John’s insights: “As a firm outside of the top 10, we rely on methodology providers and vendors in the market to provide us with the tools we need to complete our job and be compliant with the regulations. If the methodology providers aren’t keeping up with the technology changes, whereas the expectation from FRC and ICAEW is that the auditors are, there is a bit of a misstep there. It’s a challenge to overcome.”
Insight 4: Automation
Conclusion: Automation is the increasing mechanisation and digitisation of tasks that were historically manual and repetitious. Firms can get started with exploring how to obtain data sets direct from source. This can be from a client’s system or bank’s cash transactions. Obtaining data from source with the assistance of Circit’s Verified Transactions for example, produces standardised formats and creates opportunities to explore data ingestion into analytics models rather than manual entry or data formatting.
John’s insights: “For every single one of our audits we will now ingest the GL data. We are moving on to making more and more use of Open Banking data. There are limitations because not all banks are available, but what we are increasingly trying to do is connect that GL data with the bank data. It is massively powerful and it takes away a number of other tests we had to do.”
Insight 5: Open Banking
Conclusion: Open Banking is a key shift that is already underway. Significant opportunities such as AML and verifying funds are opening up the tools available for audit. However, credibility and trust are key. When looking at Open Banking Tools, it’s important to know if the vendor is an AISP (Account Information Service Provider). This gold standard gives your team and clients immediate access to those directly regulated and knowledgeable about the flow of information.
John’s insights: “It is important that an account information service provider (AISP) is directly regulated, like Circit. That means that in using them, the data can be obtained without going through a subsequent third party to collect the information. Using a third party aggregator can be confusing and challenging for clients, who get handed off to another party before getting to the bank to extract data. That can potentially create a credibility and trust issue.”
Through conversations with industry leaders and regulators, we’ve confirmed it’s undeniable that technology in audit processes is now ubiquitous. From the upcoming changes to ISQM1 to countries adopting Open Banking, the opportunities for embracing new technologies is abundant and potentially daunting for many audit firms. There are particular challenges to overcome when implementing new technologies when it comes to clients, audit teams, automation, analytics and leveraging Open Banking.
When this process is well planned out and thoughtfully executed, the benefits in terms of time saved and client satisfaction are undeniable. At Circit, we’re pleased to be the trusted technology stack partner for audit leaders globally.