In a growing organization like ours, we interview candidates very regularly as we are always on a lookout for good people to join us. Though the candidates are screened by the HR (in-house or through a consultant) and by managers before they come to me, I also spend a good amount of time to understand the candidate, level of commitment, likes and dislikes etc. I make an attempt not to ask technical questions at my level, however, the auditor in me fails me and I end up asking a good bit of technical stuff as well, which essentially may be a repeat of what my first liners would already have asked!
Of late, I have observed that I am querying the interviewees more and more on their knowledge of IT systems and how comfortable are they working in accounting platforms such as SAPs and Oracle. I sat back and thought about this. How and when did my line of questioning changed its course from some very technical questions pertaining to accounting and auditing standards to questions on how comfortable the candidate is using technology while conducting an audit!
I concluded that it was always playing on my mind at a sub-conscious level. Clients that we have met in the last few months are heavily reliant on technology and often enquire whether the audit team would be comfortable working in an IT environment, would be able to pull out reports from SAP on their own etc.
It made me realize how technology has taken over our profession. How badly is it required that our audit and accounting teams are equipped with the wherewithal required to work in a technology-driven set-up. The traditional ways of doing audit were anyways over a few years back and the risk-based approach to audit made it mandatory to use IT tools. However, the expectation from the auditors in terms of their ability to understand the company’s IT systems and work in that environment has been gaining pace lately.
I once read somewhere- “The illiterate of the 21st century will not be those who cannot read and write, but those who cannot learn, unlearn, and relearn. ”
All the audit professionals and Chartered Accountants, who have been in this space for the last decade or so, have to agree with the above. They were required to let go of the traditional ways to carry out audits and had to gear up to the present day reality of auditing in a technology-driven environment.
As far as the corporates are concerned, even the most traditional and conservative organisations have started to look at technology very seriously to address the organization’s risk management process. In all the spheres of an organization function, technology is helping automate activities and ensure effective monitoring of controls on a continuous basis.
Organisations, which were initially reluctant in picking up technology, are now finding no option but to embrace it. They have come to realize that the only way to move ahead is with the help of technology. This has also emanated from the fact that the businesses are far more complex than they used to be say a decade back. Operations, even if within India, are spread over multiple locations, thereby making it very difficult to manage without using customized and tailored solutions. Operations getting complicated and wide-spread has a direct co-relation with the accounting, which leads to the ever increasing need for new and tailored accounting solutions.
Given the above, the auditors can ill-afford not to take cognizance of the incidence of technology and most of the audit work being done now is so much dependent on technology that it gets stalled in the absence of it. Technology does not only mean complex accounting softwares etc., rather it includes the most basic of the technology such as MS Word, Excel and Power Point, without which it is almost impossible to conduct an effective audit.
To gear up to the above challenge, audit firms organize regular training programs for the staff to make sure they are upto speed with the technology and the latest developments around it. Additionally, most of the audit firms now have customized audit platforms in which the audit documentation is required to be stored in a secure environment. Moreover, innovative audit techniques such as use of algorithms and JE testing using computer tools is catching up pace. More often than not, data analytics and CAATs in one form or the other is being used in audits.
Institute of Chartered Accountants of India (ICAI) in SA-315 on ‘Identifying and assessing the risks of material misstatement’ also states that the use of automated elements in internal control affects the manner in which transactions are initiated, recorded, processed, and reported.
I would also like to add that the use of technology in audit is not and should be looked at reserved for the bigger firms or those serving a select set of clientele. True that the introduction of training programs for staff personnel or an audit software comes at a cost not only in terms of money but also in terms of time that will be invested at the initial stages, but skipping to gear up to the occasion will cost firms dearly. More so because Auditors will now be on a sticky wicket as the auditors (as well as the directors) will be held responsible for fraud or discrepancies in company operations.
In addition to the above, starting 2016, the external auditor could face up to 10 years of jail term for failing to raise red flags about frauds. This risk has led to auditors, pushing their clients to fix any deficiencies in internal controls and the auditors have realized that there is no better way to ring fence themselves except by using technology and the tools that are available. When you couple this with the fact that many companies lack the basic framework needed to control frauds, it gives a scary picture for the auditors and re-inforces the fact that technology must be used while performing the audit work.
In our firm, we ensure that there is adequate knowledge transfer between the teams and a conscious effort is made to rotate team at the ground level to give them equal exposure of various IT platforms such as SAP and Oracle.
All in all, the incidence of technology on the auditing profession cannot be over-emphasised. Those audit firms and auditors who haven’t yet come down to the stage of using technology will do well to realize its importance both from the point of view of bringing in audit efficiencies as well as identification of frauds, which has now well become auditors’ focus area.
Puneet heads the Assurance and Risk Advisory practice at International Business Advisors. He is a Chartered Accountant with 13 years of post qualification experience. He has rich experience in the field of accounting and auditing, due diligences and risk advisory to various mid-sized and large companies (Indian as well as trans-nationals) across various sectors. For most of his professional career he has worked with Big4 consulting firms such as KPMG and Deloitte. He has also spent a few years with Mazars India, where he was also looking at the risk management function for the organization, in addition to being a partner with the Assurance division. He regularly writes on various accounting and auditing matters. For any professional assistance, he can be reached at Puneet.firstname.lastname@example.org