Organizations are undergoing major changes due to the growing use of information technology. The digitization of processes and the development of new business models are reshaping the corporate landscape. Emerging technologies are transforming how we live and work, making it crucial for companies in every industry to recognize and leverage the power of these innovations. In auditing , these advancements are leading to less repetitive work and a greater emphasis on creative tasks for professionals.
Most organizations, whether required by law or by choice, need to disclose their financial statements. Auditors are responsible for ensuring the accuracy of these documents by adhering to established standards and regulations. Traditionally, procedures were automated or outsourced to reduce effort. However, technology has yet to be fully harnessed to enhance audit insights or improve the client experience. This is changing rapidly. Companies' expectations of auditors are rising, driving changes in how audits are conducted and reported.
Auditing is increasingly becoming a vital support for strategic decision-making that steers businesses. This involves formulating decisions and collecting and processing the critical data needed for informed choices. Nowadays, applications automate accounting tasks, allowing entrepreneurs, especially small business owners, to concentrate on their core business without needing deep accounting expertise. This enables them to meet all obligations, like payroll and taxes, more easily.
Innovations in accounting and auditing are liberating both professionals and small business owners from routine tasks, letting them focus on growing and innovating their businesses.
Emerging technologies are enhancing the role of technology in financial statement audits. At the same time, clients’ expectations are pushing auditors to adopt more innovative approaches and integrate new technologies into their work. Despite ongoing challenges such as regulatory requirements, initial costs, and the need for new skills, the benefits of these innovations are becoming clear, with positive feedback from clients who have experienced these technologies in auditing.
Automation as a Support in Financial Processes Process automation is playing a crucial role in the digital transformation reshaping the business world. Companies adopting this emerging technology are seeing significant benefits, boosting both efficiency and competitiveness.
Technologies like Robotic Process Automation (RPA) are now widely used to automate business activities, particularly in finance and accounting. This includes automating processes such as billing and receivables, procurement and accounts payable, production, and inventory management. RPA also enhances the financial closing process by handling reconciliations, managing and resolving exceptions, recording journal entries in the general ledger, completing intercompany transactions, and performing consolidation and reporting functions.
Automation not only reduces but often eliminates the need for physical document circulation within companies, and it cuts down on repetitive data entry and reconciliations. These advancements lead to significant gains in time and productivity. The increasing trend towards automation offers numerous benefits to the financial sector, including improved efficiency, agility, security, and reliability in financial performance indicators. This, in turn, enables more informed strategic decisions and supports sustainable growth.
Effective automation has become essential for companies aiming to deliver high-quality services and comply rigorously with tax requirements. Automation allows for consistent, real-time information retrieval and integrates various areas of the company reliably. Market research indicates that investing in financial process automation not only enhances process efficiency but also ensures adherence to fiscal obligations.
While automation is increasingly handling routine cognitive tasks, it cannot replace human interaction. Financial professionals need to specialize as strategists, using automation as a tool to help guide their clients' businesses toward success.
Benefits of Robot Auditing Departments tasked with creating and maintaining robots face various risk and control standards and may not always fully master the correct procedures. External and internal audits are crucial for ensuring a strong governance framework that supports each robot delivery model, adhering to clear standards of organizational oversight, business justification, and development norms established by a center of excellence.
While Robotic Process Automation (RPA) offers significant advantages, it can, in some cases, diminish the effectiveness of process control. In such scenarios, the benefits of RPA might not justify the investment costs, and the proliferation of robots could lead to a more vulnerable and fragmented technological environment. Therefore, it's essential to conduct a structured evaluation to determine which processes are suitable for automation. Key factors include the inherent risk of the process, complexity, the subjectivity of outcomes, IT environment stability, and expected benefits such as increased efficiency and cost reduction.
Another critical consideration is that robots may not always meet their initial objectives. Additionally, because they lack the ability to detect anomalies and irregularities like humans can, they might produce incorrect results. Thus, data quality is crucial for the effectiveness of robots, and robust data governance controls are essential from the design phase, even for simple robots. This includes maintaining source data, ensuring data integrity, and safeguarding information security and confidentiality—key elements for maintaining credibility. Both internal and external audits should verify that process mapping, including lifecycle and data quality, is complete.
Robot development must follow standard IT development principles, including thorough testing before implementation. This process involves creating proof of concepts and transition phases, where automated and non-automated processes run in parallel to compare results. Additionally, monitoring routines and error-handling procedures should be implemented to ensure early detection of issues and automatic responses when possible.
One area of concern is the behavior of robots in production, which may exhibit a high rate of errors. Depending on the associated risk, robots might require varying levels of human supervision based on specific metrics. Audits should review whether the list of key risk indicators is comprehensive and provide assurances about the accuracy of management metrics. They should also test the effectiveness of robots' alert systems and shutdown procedures to immediately halt operations in case of problems, analyze quarantined exceptions to ensure timely human intervention, and assess problem and complaint logs to determine if issues are related to robot performance.
Audits must also establish clear responsibilities for deciding when robot modifications are necessary and who should reassess risks. It's important to review whether there is a structured change management process in place, including controls over who can implement those changes.
Finally, the widespread use of robots can create a dependency that leaves businesses vulnerable in the event of failures, particularly if the company loses critical process knowledge. If a robot fails, there might not be enough personnel to manually operate the processes in its absence. In this context, audits should confirm the existence of a clear business continuity plan, including backup procedures and data sources needed to complete the work. It's also crucial to review whether the continuity plan outlines how activities will be resumed, if there are regular tests of system capacity, and if there's a process to notify affected areas of the robot's incapacity. As robots evolve over time, periodic risk assessments will be necessary to determine if they should be decommissioned.
Digitalization in Auditing: The New Frontier of the Profession Technological disruption is reshaping the education and skills needed for accountants and auditors. Nowadays, professionals in this field must go beyond a solid foundation in accounting to develop sharp critical thinking skills for applying professional judgment effectively. This includes a strong grasp of programming languages and advanced analytical and communication skills, such as sophisticated writing, logic, philosophy, and effective verbal presentations.
Modern auditing is increasingly focused on estimates and valuation modeling, which requires auditors to have a deep understanding of both the modeling techniques and the underlying data. Consequently, data analysis and financial expertise have become essential. To be a successful auditor in the 21st century, one must surpass traditional training and engage in continuous and diverse learning.
Digitalization in auditing is an ongoing and transformative process. The first major step in this evolution is automating data collection and preparation. This involves streamlining the auditing documentation process and establishing a standardized flow of information between the auditor and the audited entity. Additionally, it includes automating data preparation tasks such as validation, extraction, and processing. At this stage, auditors can use software programmed to handle repetitive tasks, mimicking human actions—a technique known as Robotic Process Automation (RPA).
The second key aspect of digital auditing is data analysis. Once data sets are captured and validated, auditors can start analyzing them. This data can come in structured formats, such as Excel spreadsheets or database extracts, or in unstructured formats, such as text, images, audio, or video. There are various tools and methods available to help auditors manage large volumes of data, enabling them to identify risks and gain insights that support their professional judgments with concrete evidence.
One of the notable techniques available to auditors is machine learning. This method involves creating algorithms and statistical models that allow computers to perform specific tasks without needing ongoing instructions. These techniques also improve over time as they are exposed to more data, becoming more efficient with experience.
Auditors now have access to vast amounts of data that can enhance evidence collection and support their opinions. Although these digital techniques are not yet widely used in financial statement audits, they have already proven their value in other areas. The challenges and barriers to their use can be addressed as needed.
The reality is that the world is becoming increasingly digital, and auditing must keep pace. Data is now the cornerstone of everything, and rules are enforced through electronic procedures and algorithms. Therefore, auditing must continuously evolve towards digitalization to remain relevant in the new market reality and continue providing value in an increasingly digital world.
For more information, contact TATICCA – ALLINIAL GLOBAL , which provides integrated services in auditing, internal auditing, accounting, taxes, corporate finance, financial advisory, risk advisory, technology, business consulting, and training. Visit www.taticca.com.br or email taticca@taticca.com.br to learn more. Our company employs certified methodologies for conducting these activities.
