White paper
Modernize your audit practice: Tools shaping the future of auditing
Given the availability of data, greater client expectations, and an influx of innovative technologies, today’s auditors are increasingly rethinking how they approach their work and advance efficiencies.
Even before the COVID-19 pandemic, an evolution of audit was already underway. After the pandemic, the acceleration toward remote audits has shifted into high gear. Clients want and expect their auditors to be current with new technologies, up to speed on evolving regulatory changes and professional standards, and well skilled in communication and critical thinking.
To remain competitive, firms must embrace innovation to help propel them into the next generation of audits.
This white paper explores how firms can modernize their audit practice and, in turn, improve efficiencies, strengthen data security, and attract and retain top talent in today’s challenging environment.
Technology: The key to modernization
Modernizing the audit practice begins with implementing the right technology. Innovative solutions, such as cloud-native platforms, data analytics, and artificial intelligence (AI), are crucial to unlocking improved workflow efficiencies, greater use of data, strengthened security, and deeper risk assessments.
Consider this: the Thomson Reuters Institute “Tax professionals 2022 report” found that large firms cited investing in new tax technologies as the preferred route to greater efficiency. Leaders in these firms also placed new analytics tools and auditing technologies at the top of their technological wish lists.
Remote audits
Advancements in technology have made remote work increasingly normalized, especially as employee expectations and desires shift and firms discover the benefits of working outside the constraints of a traditional brick-and-mortar office. Plus, the ability to perform high-quality audits at a distance offers many potential benefits to firms, including the ability to take on new business opportunities and hire talent in geographic locations other than their own.
While in-person audits are second nature for accounting firms, the logistics are slightly different in a remote environment. Here are items to keep in mind while developing your remote audit strategy.
- Client availability
It’s hard to know where your clients are in the process of remote business continuity and their ability to access the information you need to conduct the audit. They may need to be in the office to get some of the information you need, so it’s good to do some pre-planning to ensure that everything goes smoothly.
- Obtaining client records
If the client can send you records electronically, you must have a secure way to receive them. It’s dangerous to send sensitive information via email, and read-only records could fall short of the level of access you need to get into the data. Many firms have successfully used secure client portals to transfer records safely. If your firm doesn’t already have the technology, it’s worth looking into secure portals for this purpose.
- Don’t forget about communication
Communication is the foundation of your remote audit program. Think about communication with your engagement team members and your clients. A clear communication plan will go a long way toward ensuring a successful remote audit launch.
- Documentation
Consider retaining all email and electronic communications, which might help meet the audit documentation requirements. For the work papers, either include the relevant portion of the electronic communication or document the details of an email communication the same way you would document an in-person conversation conducted onsite, the way it's used as audit evidence.
Remote audit engagements offer unprecedented flexibility for both clients and firms; however, the success of any remote audit team rests on building a collaboration toolbox full of software and strategies to ensure clear communication with team members and clients, ensuring that all involved can send and receive the necessary information to complete the audit effectively and accurately.
The cloud: Table stakes for a modern audit
Cloud solutions — more specifically, cloud-native solutions — are a must-have for firms looking to modernize their audit practice. By leveraging cloud-native solutions, audit firms can access data, systems, and applications from virtually any location. This is especially important when remote audits are necessary, as many firms discovered in the wake of the pandemic.
While the pandemic quickened the pace, remote auditing was already entering a new era. Remote and hybrid work models are now common, which presents new necessities and opportunities for cloud-based auditing.
For example, according to Accounting Today, 66% of accounting firm staff worked in the office full time in 2022, compared to 85% before the pandemic. Additionally, almost 60% of companies have at least one employee working remotely, many across state lines. Near the end of 2021, the Internal Audit Association (IAA) also stated in the annual North American Pulse of Internal Audit survey that 58% of chief audit executives (CAEs) reported the majority of their work was performed remotely, with 22% stating it was an equal mix of in-person and remote time.
The ability to conduct remote audits effectively and securely begins with implementing the right cloud solution. Unlike solutions that are simply cloud enabled, a cloud-native solution is designed and built in a cloud infrastructure. Leveraging a cloud-native solution enables firms to enjoy the cloud-computing delivery model’s full advantages and deliver a modern user experience.
78% of CEOs, CFOs, and other financial executives believe auditors should use more sophisticated technologies for data gathering and analysis 52% of firms reported that they are actively approaching clients about permanently moving to remote audits.
Outdated systems and applications are disconnected from one another, leading to version-control issues, collaboration issues between peers and clients, and missed opportunities to leverage them between various tools and users. Firms can maximize time and minimize risk on even the most complex audit engagements by adopting a completely integrated, cloud-native solution.
It’s important to note that using outdated systems can also lead to increased security risks. Why?
Accounting firms are gatekeepers to a treasure trove of sensitive client data and are responsible for ensuring that data is protected. Outdated software leaves firms open to security vulnerabilities like malware. On-premise servers risk data loss and backup and recovery challenges if not properly maintained and secured. Yes, firms can store data on an off-site backup server, but this comes with additional costs and maintenance fees. Furthermore, sensitive data can fall into the wrong hands if a laptop gets misplaced or stolen.
Cloud solutions provide greater security because they store client data on remote, encrypted servers with redundant, up-to-date security measures for retrieval only by those people authorized to access them. Leveraging the cloud also helps ensure business continuity when unforeseen events happen, such as a natural disaster, cyberattack, or a global event like the COVID-19 pandemic.
In short, cloud-native platforms are an essential first step toward a modernized audit practice. If your firm still uses outdated software, it’s time for a change.
Greater automation
A commonly cited study estimates that companies could be losing 20% to 30% in revenue each year due to inefficiencies. Is your firm among them?
The reality is that inefficiencies and bottlenecks in your firm’s workflow negatively impact productivity and time spent on tasks, quality of services, and profitability. Sharing data across applications and leveraging automation to weed out tedious, manual tasks — such as double data entry — enables firms to save time and resources while streamlining workflows.
Consider, for example, integrating the Confirmation solution, a provider of secure audit confirmation services, with Thomson Reuters Cloud Audit Suite. This integration eliminates the need for multiple applications and enables firms to manage the full spectrum of audit tasks, including digital audit confirmations, in one place.
Companies could be losing 20% to 30% in revenue each year due to inefficiencies
When evaluating an integrated, cloud-native platform, consider a solution that delivers at least the following features:
- A web-based engagement management tool that requires no software downloads, updates, or versioning that impacts productivity
- The latest audit standards are automatically incorporated in the audit guides to ensure you comply and pass peer review
- Automated document retention policies
- The ability to instantly access audit data from any location with simplified workflows that eliminate the worry about transferring, backing up, restoring, or refreshing audit files
- Web-based audit planning workflow management that ensures staff always has the latest version of a document
- End-to-end audit solution, including single audits, to avoid wasting time with multiple sources
- The ability to initiate, monitor, and receive confirmations all from within one application
- Ingests data from 100% of client accounting systems in real time
- An automated sampling process to save time
- Automated PBC workflow and project management, as well as data extraction and validation from 100% of client ERP systems
Leveraging application programming interfaces (APIs) is also crucial to achieving greater automation of key processes.
An API is a set of routines, protocols, and tools for building software applications. An API specifies how software components should interact and enables applications to exchange data and functionality. In short, APIs connect otherwise disconnected third-party systems.
- With APIs, modern audit practices can:
- Avoid entering data manually to reduce the risk of errors
- Increase visibility of client needs with connected solutions
- Gain insights for analysis and decision support
- Automate key processes and reduce hours spent on mundane tasks
- Connect otherwise disconnected third-party systems
“For example, I’m going to import my client’s general ledger and I’m going to create a trial balance. My audit team will use that to do their audit. My tax staff will use that to prepare their tax return. You’re just sharing all of that data and using APIs allows you to do that. It allows programs to talk to each other and share data.”
The power of data analytics and AI
Auditors can also enhance the value of the audit and transform the audit experience for both their firm and their clients by leveraging advanced technologies like data analytics and artificial intelligence (AI).
According to the Sage bookkeeping statistics, 57% of accountants listed technology literacy as the most critical skill for future employees in the field. Additionally, more than half (58%) said AI would improve operations, automate tasks, and increase productivity.
One of the most significant benefits of analytics and AI-enabled solutions is more efficient audit planning and the ability to analyze vast amounts of data to identify anomalies and patterns in a way that a human auditor cannot. This ability translates into a more effective audit and greater efficiencies for the firm.
Implementing the right AI-enabled solutions can also help auditors improve risk assessments by, for instance, identifying and aggregating risks that other firms have identified in similar types of engagements.
To further illustrate the benefits of analytics and AI, a report by the Chartered Professional Accountants of Canada (CPA Canada) and the AICPA provided the following examples:
Analytics can be used to dynamically visualize contract data and metrics — for example, margin and related contract asset position — to inform risk assessment over the portfolio or analyze positions of contract types or specific contracts.
AI can be used to analyze contract agreements and documents for unusual terms or clauses that require additional consideration.
58% of accountants said that AI would help to improve operations, automate tasks, and increase productivity
However, it is important to remember that leveraging data analytics and AI-enabled solutions doesn’t eliminate the auditor's role. Instead, it improves the audit's quality and efficiency and shifts the auditor's role. By spending less time gathering, correlating, formatting, and summarizing data, auditors can focus more effort on identifying and auditing areas of higher risk and delivering greater consultative services and strategic business insights.
As stated in the CPA Canada/AICPA report: “With the combination of today’s computing power (and ease of access to it), machine learning and AI-enabled audit tools, enormous volumes of data can be analyzed to find anomalies and identify insights, patterns, and relationships that are not readily apparent to a human. However, it takes human insight and experience to understand the output, to determine if the information represents a true anomaly and, more importantly, to determine what the anomalies, insights or patterns imply in the overall context.”
Enhance advisory services
By leveraging such advanced technologies, firms can deliver more excellent consultative services and strategic business insights to their clients that extend beyond the audit. This leads to stronger client relationships and, ultimately, greater profitability.
Take, for example, an auditor with numerous clients within the construction industry and knows common ratios for that particular industry. By analyzing a client’s ratios, an auditor may determine, for instance, if their gross profit percentages are much lower than expected compared to other clients within the construction industry.
Further underscoring this point, KPMG/Forbes Insights research found that respondents gave audit high marks for providing more insights to help make more informed business decisions. More specifically, when asked which of the following valuable insights they received as an output from their audit, respondents said:
- Insights leading to proactive quality assurance and regulatory compliance (67%)
- Help assessing risks and risk management practices (56%)
- More transparency about arriving at the audit opinion and about what has been learned during the audit (54%)
- A forward-trending view of risks (47%)
- A more holistic view of the state and prospects of the organization (43%)
- A forward-trending view of data (41%)
As the KPMG/Forbes Insights report states, “Clearly, auditors who look at the total landscape and drill down on the issues that are most relevant and important to a given organization can add the most value. Increasingly, clients are not only expecting this, but demanding this.”
For example, a solution like Thomson Reuters Practice Forward enables firms to build a scalable advisory services model that will impress clients and ultimately generate more revenue. Practice Forward gives firms access to proven business model concepts, instructions and exclusive tools, personal consulting sessions, and more to help them take their services to the next level.
Recruit and retain top talent
Most people have grown accustomed to using the latest devices, software, and apps in their personal lives and they desire the same ease of use, accessibility, and convenience in the technology within their workplace. Auditors are no exception.
Implementing innovative technologies isn’t only about having the latest and greatest new gadgets. Modernizing your audit practice and driving greater efficiencies helps keep staff engaged and confident — and with cloud solutions and remote capabilities, they can enjoy a better work-life balance.
When firms leverage automation to weed out mundane, manual tasks, it not only reduces the risk of errors and inefficiencies but also provides associates the time to focus on more fulfilling and rewarding work. This means happier, more engaged employees and a reduction in staff turnover.
Enabling associates to have a better work-life balance by implementing the latest cloud technologies for remote capabilities is also critical in attracting and retaining top talent.
Consider this: according to a Pew Research Center survey, only 20% of employed adults said they worked from home before the pandemic. Now, 71% of those workers work from home all or most of the time. Furthermore, the survey found that about half (49%) of respondents said they now have more flexibility to choose when they put in their hours, and 38% of new teleworkers said it’s easier now to balance work with family responsibilities.
In addition, firms that demonstrate an eagerness to invest in innovative technologies send a message to prospective — and current — employees that they are a future-ready, forward-looking practice.
The talent war shows few signs of slowing in today's complex and challenging environment. Attracting and retaining quality staff has been, and continues to be, a top concern for many firms, especially those using antiquated technology.
Conclusion
Faced with the availability of vast amounts of data, greater client expectations, and the rise of innovative technologies such as data analytics and AI, it is imperative that today’s auditors rethink how they approach their work and advance efficiencies to remain competitive.
For firms looking to modernize their audit practice, the journey begins with leveraging the right technologies that enable greater automation, deeper strategic business insights for their clients, and remote capabilities.
The good news is that firms don’t have to embark on this journey alone. If your firm is among those looking for guidance, a trusted solution provider like Thomson Reuters can help modernize your audit practice and transform the audit experience for both your firm and your clients.
71% of workers are doing their jobs from home all or most of the time
Recommended products
Thomson Reuters offers solutions to help your firm at any stage of its modernization journey. Learn more about our recommended products below and contact a representative for additional information.
AdvanceFlow
Thomson Reuters AdvanceFlow is the first cloud-based audit engagement software that combines the convenience of the cloud with enterprise-level processing power. Engagements, workpapers, and colleagues are available in real time, whether you’re in the office, in the field, or anywhere else. It’s a new level of convenience — backed by the auditing tools and trial balance power to handle the most complex clients and data-heavy jobs.
Checkpoint® Engage
In a constantly changing landscape of accounting standard updates, there’s a new way to achieve the efficiency, accuracy, and consistency you need to manage your audit and accounting engagements. Checkpoint Engage from Thomson Reuters is the only fully integrated preparation, compilation, review, and audit solution built by your trusted global technology partner with a worldwide footprint of developers, data scientists, innovation labs, and a robust application ecosystem. Leveraging a truly web-native environment will ensure staff access and collaboration from anywhere, anytime, and eliminate version-control worries.
Confirmation
Confirming financial data is all about finding truth — and that truth should be easy to find. But it's often difficult for auditors, bankers, lawyers, and credit managers. We’re auditors. We get it. That’s why we built Confirmation. Our platform is the choice for easy validation of financial and other sensitive data. Trusted confirmations. Everywhere, every time. One-and-a-half million auditors, bankers, and financial professionals worldwide trust Confirmation to validate data and identify fraud.
GoFileRoom
It’s time to banish paper files and storage fees. Thomson Reuters GoFileRoom is cloud-based electronic document storage software designed for tax and accounting professionals. It offers an arsenal of features to give your firm 24/7 access to document storage in the cloud. Your staff can quickly associate client documents to workflows while uploading files to this web-based document management system (DMS). Streamline your processes and create a truly paperless office. Plus, integrate GoFileRoom with other products to save even more time and money.
AuditWatch
The recognized leader in productivity, Thomson Reuters AuditWatch serves the profession by providing technical and professional training to master your specialization and leading experts to partner with firms. It is available in three delivery options: public seminars, in-house seminars, and customized training, and also offers consulting, customized course development, and more. Public live seminars offer open enrollment while onsite, and firm-specific seminars and customized training for professionals are tailored to meet your firm’s development needs. Customized webinars are also available.
Checkpoint Edge
Trusted by 200,000 users, Checkpoint Edge from Thomson Reuters is the next generation of our Checkpoint research and guidance tool for tax and accounting professionals. It delivers the latest in artificial intelligence, cognitive computing, and machine-learning technologies, combined with our editorial staff's tax and accounting expertise. It enables you to find fast, accurate answers with a more fluid and intuitive user experience.
A comprehensive suite of products to help you confidently and efficiently complete accurate audits