She adds that mindset is critical to the successful application of data analytics to the auditing process. “Moving from traditional models of auditing and data capture does require a different set of skills and an understanding of how the outputs and the data can be used,” she says. “So it’s important to ensure that people are trained to treat data as a company asset, and that the teams in the business get behind the cultural shift so that the data pool can be harnessed in new and innovative ways.”
The pressure on companies to keep data safe explains why cyber risk is a prominent item on audit committee agendas. Steve West, Audit Committee Chair of US technology company Cisco, says the audit committee there reviews cyber risk at its “deep dive” meetings and monitors the cyber risk environment using a dashboard that it shares with the rest of the board. Cyber security is also a top priority for Munjee, who says: “Companies must have sufficient defenses, because they are going to be hacked, whether they like it or not.”
The potential of AI
Some companies are also starting to adopt artificial intelligence (AI). “It is being used,” West confirms, “but it seems to be a slow-as-you-go development.”
He believes AI is the “next frontier” for audit, after data analytics. One possible future use case for AI is the analysis of unstructured data such as emails, social media posts and conference call files to search for evidence of fraud. Another is the extraction of key information from large numbers of contracts, such as leases.
Dillon believes that AI is already adding more logic to the “reasonableness” test that examines the validity of accounting information. “In the past, auditors would look at statistical variances and ask, ‘Is that reasonable and can I explain why those variances occurred?’” he says. “Today, you can use AI to come up with more ‘reasonableness’ analyses than you could have in the past. That gives you a more thorough assessment of the quality of the data.”
Other emerging technologies that have the potential to transform the audit include robotic process automation, which can be used to generate audit-ready work papers, and drones, which can be an effective way for auditors to conduct inventory counts in remote locations.
Together with data analytics and AI, these technologies could bring about substantive improvements in audit quality in the future. “Auditors are trying extremely hard to see how they can use technology to improve their audits,” says Gambier.