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Auditing your audit process
The strong, ongoing demand and need for audit services makes them both a revenue and growth driver for many accounting firms. However, producing high-quality audits at scale can take substantial resources. With accounting talent becoming increasingly scarce and the implementation of new standards on the horizon, efficiency will be an essential component for firms continuing to provide these critical offerings.
In January 2024, Arizent — the parent company of Accounting Today — conducted a survey on behalf of Thomson Reuters of more than 100 accounting professionals who provide audit services to their clients. The results indicate opportunities for firms to enhance and streamline the audit process.
Firms rely heavily on audits for revenue and new business
Audit services typically represent a core offering for accounting firms. More than half (55%) see them as a primary part of the business, and another 28% see audits as a secondary service tier. Just 16% offer audits as a minimal, ancillary part of their businesses. Clearly, most firms that offer audit services see value in them. This value comes both in the form of client demand and in the profitability of these services.
Audit services also provide accountants with a vital, trusted engagement with clients that can lead to additional interactions and services. As a respondent from a firm with between 100 and 249 employees notes, “Audits are the largest generator of revenues at our firm and are one of the core services provided. Many other engagements and service lines have stemmed from referrals from our audit clients.”
Strong demand for audits has put a strain on firm resources
More than half of respondents report that, over the past two years, the overall number of audits performed has increased, as has the quality of those audits (see Figure 1). Keeping up with the rising demand for high-quality audits has required accounting firms to devote more resources to them, such as more staff time. To mitigate this need for more resources, firms have taken actions to make the process more efficient and increase collaboration among audit staff members. But these efforts have fallen short to date.
Firms aren’t taking full advantage of technologies that can make audits more efficient
One explanation for this shortfall may lie in accountants’ continued loyalty to manual processes. Some firms have even increased their reliance on them in the past two years. This trend is particularly acute among firms with the least resources to spare: six in 10 respondents at firms with four or fewer employees still use pen and paper to complete audits. In general, respondents to the study report using less-than-high-tech tools to perform their audit process, with spreadsheets, word processors, and trial balance software taking top spots (see Figure 2).
Accounting firms have been slower in adopting more efficient technologies in their audit processes than other business areas. Many continue to use on-premise storage for their audit tools despite embracing cloud-based data storage for different types of technology, such as document management, client communication, and research software. The net result of these trends in technology use is a cumbersome, resource-intensive audit process that can make effective collaboration difficult, particularly in hybrid and remote work environments.
Leveraging new technologies in connected ways can ease the burden of a changing landscape
The high-value nature of audit work undoubtedly plays a role in why accountants have approached changes to these processes with caution. Balancing the need for a quality product with the resource demands to create it — staff time, technology, etc. — is paramount if firms want to continue in the audit business. Nearly half (48%) have seen an increase in the risk they associate with the audit process over the past two to three years. Today, new technologies designed for the accounting industry are changing that risk calculation.
Integrated, cloud-based workflow solutions give accountants secure access to audit documents anywhere, at any time. Enhanced collaboration features make it possible to deliver error-free, high-quality audits more quickly by eliminating bottlenecks in the process.
Access to audit materials is no small matter, according to survey respondents. More than 90% of accounting professionals (93%) agree that having access to audit documents from any location — whether in the office, at home, or in the field — is essential to their job. An additional 67% describe the ability to collaborate across the firm on audit-related tasks as critical or highly important.
Automated workflows also play a role in implementing new or updated standards, an essential consideration as the industry continues to evolve. Consider the AICPA quality management standards for audits — which, as of the survey, only 30% of firms have started to implement. Those firms that have are benefitting from these standards, reporting increases in audit quality and efficiency. In other words, as standards change, an automated process can make them easier to implement and benefit from.
In addition, professionals can use workflow tools to gain broader operational efficiency. For example, AI prompts can generate audit documentation that meets standards, speeding up work paper synchronization and review. Technology with an interactive knowledge base provides continuing education and career development by presenting relevant information based on the current state of an audit, saving time auditors might otherwise use on open-ended web searches or offline research. Not to mention, it offers a path to gaining the needed CPE credits.
“Accounting firms that fail to adopt technologies that support a more efficient audit workflow risk limiting a core part of their business,” says David Wyle, General Manager, Audit, at Thomson Reuters. “Tapping into new technologies and training in connected ways — for example, cloud, data integration, automation, and AI — can ease the burden of the changing audit landscape.”
Firms that can identify and implement these technologies could find themselves in a better position to increase the value of a core service line even as demand for audits remains high. “Choosing and implementing the right mix of technologies strategically is an important consideration both for gaining efficiencies sooner and for avoiding integration issues in the future,” says Wyle.
Methodology
Arizent, the parent company of Accounting Today, conducted this research online in January 2024 among 111 qualified respondents. To qualify, all respondents had to work at accounting firms that offer audits, and the respondents were required to directly provide audit services to their clients.
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