The dramatic increase in the use of automated tools for audit is helping to improve audit quality, says a new report from the Financial Reporting Council.
It says there has been a step change in the use of technology in the last three years, as firms have invested considerably in the infrastructure required to efficiently capture, collate and organise data.
The one fly in the ointment for auditors is that they are dependent on whether companies have a robust IT infrastructure, that allows data to be extracted in a useable form to challenge management.
The FRC found emerging technologies such as machine learning and predictive analysis, although in their infancy, can help identify unusual transactions or challenge judgements around going concern or impairment that would not otherwise be found by a human auditor.
Closer analysis of audit inspections also revealed:
- The most prevalent use of audit data analytics (ADA) beyond journals is in high volume, low judgement transactions such as revenue testing.
- Audit teams use ADA to focus audit testing on the areas of highest risk through stratification of large populations.
- In response to audit inspection findings, audit teams have improved their documentation and evidence supporting the use of ADA.
- Automated tools are deployed with sufficient training and support.
FRC’s David Rule said: ”Technology provides opportunities to deter fraud and the manipulation of accounts by analysing entire populations of data and identifying unusual transactions.”