How to Improve Your Remote Audits with Automation
by L. Gary Boomer, CPA, CITP, CGMA, MAcc
Table of Contents
Tools For Immediate Impact
About Thomson Reuters
The Automated Audit & APIS
Introduction
Technology continues to drive big change in the audit profession. And the COVID-19 pandemic accelerated the pace of digital transformation. The challenge for auditors and their colleagues is to stay ahead of these developments.
At Thomson Reuters®, it’s no secret that we think change can be for the better. We have invested in innovations that help auditors work smarter, not harder. Our advanced technology creates a faster, data-driven environment which allows for dramatic efficiency gains in the audit process.
Automation of previously labor-intensive, manual processes is one example of the digitization wave that’s freeing audit professionals from routine and mundane activities, allowing them to devote more time to high-value, client-driven work as well as enabling remote audits.
In this guide, you’ll learn how technology is automating the practice of audit, how this timesaving automation can help improve the quality of your remote audits, and the mindset and literal shifts you and your team need to make to capitalize on this opportunity.
Advances in technology are affecting every profession, and audit is no exception. Just as the practice and management of audit were influenced by much earlier developments, like computerized accounting systems, the audit is now being influenced by developments such as artificial intelligence (AI), machine learning, and cognitive systems, not to mention data analytics and the potential for 100 percent sampling, as well as a host of internet-based technologies.
Mindset and Literal Shifts
Advances in technology are affecting every profession, and audit is no exception. Just as the practice and management of audit were influenced by much earlier developments, like computerized accounting systems, the audit is now being influenced by developments such as artificial intelligence (AI), machine learning, and cognitive systems, not to mention data analytics and the potential for 100 percent sampling, as well as a host of internet-based technologies.
As with any new technology, it can be difficult to predict with accuracy how the developments will shape the practice of audit, how quickly, or which advances will have the most impact. Bill Gates, famously, almost missed the internet. But some emerging technologies are already impacting some of the bigger firms and even some smaller firms and audit entities, too.
Many aspects of the audit are shifting to digital as companies try to do more with less for several reasons:
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Enrollment in accounting programs is declining, and many accounting majors are not seeking the CPA credential as they don’t believe they will realize a return on the investment
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Experienced accounting professionals from the Baby Boomer generation are retiring from the workforce faster than firms can onboard and train their replacements
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Artificial intelligence (AI), machine learning, and blockchain technology have the potential to vastly automate accounting processes in compliance with regulatory requirements and disrupt auditing practices
The technology solutions a firm and its clients use play a crucial role in making these changes possible. But perhaps just as crucial is a shift in mindset.
Many accounting firm leaders want their firms to be innovative. However, calling yourself innovative and asking team members to submit innovative ideas into a suggestion box doesn’t make an innovative firm.
Most accountants were trained to think incrementally rather than exponentially, in a world of scarcity. They were also taught to avoid or, at best, manage risk. What some people think of as innovation in the accounting profession is actually optimization.
Optimization takes what you have and improves it incrementally, whereas innovation is exponential growth and improvement. There’s nothing wrong with optimization, but innovation is different and requires a much different mindset.
47.98%
of firms use cloud-based technology
for at least some audit processes
Auditing in the Cloud
Before records were digitized, manually matching invoices, delivery notes, and purchase orders was the only option. Being on-site to conduct an audit was essential before business systems became location agnostic and remote access became simpler.
Today, the cloud offers a virtual workspace for coworkers and colleagues worldwide. Companies and their auditors can share information, track progress, and work on a single source of accurate data asynchronously or in real-time. Cloud-based technologies provide a secure, accessible source of information while reducing the burden on team members and requiring less time and fewer people to get the job done.
Prior to the COVID-19 pandemic, such virtual collaboration was nice to have and potentially differentiated innovative firms from the competition. However, in a mid- or post-pandemic world, auditing in the cloud has become the norm rather than the exception.
According to our Confirmation auditor survey done in April/May 2022, nearly half of firms (47.98%) use cloud-based technology for at least some audit processes. Roughly one-third of respondents were unsure, leaving just 18.86% of firms doing no cloud auditing at all. Furthermore, 84.15% of respondents that are using cloud audit technology said that 25% or more of their firm’s audit work is done in the cloud.
Despite this shift, some myths about auditing in the cloud persist. Let’s address some of those myths.
Myth #1
Myth #2
Myth #3
Myth #4
Myth #1: Auditing in the cloud is less secure
According to (ISC)2’s 2020 Cloud Security Report, 35% of organizations hold back on cloud adoption due to data security concerns and risk of data loss and leakage. However, the potential for better security and stronger data resiliency are more likely in the cloud than in on-premise systems.
When conducting in-person audits, auditors tend to keep a large amount of information on their laptops. If a laptop gets lost or stolen, sensitive client data is at risk.
Auditing with cloud-based audit engagement software and document storage software hosted in the cloud is more secure than in-person auditing because all client data is stored on remote, encrypted servers with the latest security and authorization controls.
Myth #2: Auditing in the cloud is expensive
A study from market research firm IDC and cited by Entrepreneur found that companies lose 20 to 30 percent of their revenue each year due to inefficiencies.
Time is money, and if your firm’s audit processes require manual manipulation of data, time-consuming analysis, and updating on-premises systems, you’re wasting a lot of both.
Leveraging cloud-based technology and automation have proven to be a more economical solution, as it takes less time to execute high-quality audits.
Myth #3: Auditing in the cloud is too complicated
Today’s cloud audit tools are designed to work together to simplify workflows, supercharge efficiencies, and perform deep analysis in far less time than it takes using traditional sampling and testing techniques.
Myth #4: Auditing in the cloud doesn’t comply with auditing standards
Online audit and accounting tools make it possible to perform physical inventories, test internal controls, and effectively handle all required audit procedures remotely or on-site. Technology also helps eliminate traditional, outdated confirmation methods that are prone to errors and fraud.
"We have been able to streamline our audit process and stop chasing paper."
Brent Pruim
Strategic Analyst, Rehmann
Success Story: Rehmann
Rehmann is a top 50 firm (#36 on the 2022 Accounting Today Top 100 list) with 18 offices across Michigan, Ohio, and Florida. Its firm-wide assurance department requests thousands of confirmation every year. Initially, Rehmann rolled out the Thomson Reuters Confirmation platform to only a few offices, but once the faster confirmation replies and overall time savings became evident, use of Confirmation quickly expanded throughout the company. It’s now a tool that the entire assurance department, more than 200 auditors, relies on daily.
Brent Pruim, a Strategic Analyst with Rehmann, started with the company as an auditor himself, managing audits and preparing tax returns. Today, he’s the tech liaison for his department, the leader of the information technology general controls team, and a member of his department’s IT subcommittee. In his current role, Pruim is responsible for leading the change to ensure Rehmann is identifying the audit of the future. Day-to-day, he makes sure Rehmann is taking advantage of the efficiencies offered by emerging tech in the industry, including how Confirmation fits into his charge of leading the company toward the future.
Replacing uncertainty with security
Pruim’s audit experience includes both public and private sector audits. “Our clients are very busy people – they want to make sure the data they share with us is secure, but don’t want to spend a lot of time managing the risks that come with sharing this type of information,” Pruim says. “With paper confirmations, we would request that clients complete a confirmation form using a Microsoft® Word or Excel document, then print, sign, and send it back to us. That’s a very time-consuming process and certainly not the most secure way to share confidential information.”
Since implementing Confirmation, these transactions have become much easier and far more secure. Pruim explained, “It’s helped us organize a very routine part of our audit process. Confirmation gives us and our clients a great level of comfort that we no longer have confidential information on pieces of paper floating around in the mail.”
”Before using Confirmation, we could be chasing down paper confirmations for weeks. We would call the financial institution, and they might say they never received anything, meaning you have to contact the client and inconvenience them to sign a new confirmation so you can mail it out. Avoiding issues and uncertainties like this can end up saving us several hours over the course of a simple engagement,” Pruim said.
Better communication has its benefits
Prium trains associates on using Confirmation and assists the clients when necessary. Along the way, he’s picked up on several key benefits to both his colleagues at Rehmann and the firm’s clients.
Better client relationships
Pruim stresses the importance of the initial communication with a client – letting them know they’ll be receiving emailed confirmation-related requests from Confirmation, what that means, and from there, firm-to-client communication through Confirmation becomes a very self-sustaining process.
“Once we explain that we’re utilizing this technology to make things easier and more secure, they get it immediately. They click a button in their email, which authorizes us to confirm accounts with just one click. From my side, that’s what most enhances the client experience. We don’t have to keep going back to them and making requests." says Pruim on Rehmann’s client relationships.
Better audit notes
Another great benefit of using Confirmation is that if and when an unexpected balance turns up, Pruim’s team can reconfirm–at no cost and right away. “The person who confirms usually responds pretty quickly, too. That interaction with the person doing the confirmation, and the fact that you can ask them questions about uncertainties, is a great feature,” Pruim shared. This two-way communication results in an audit trail of the process that is easy to follow and can be re-performed. Clear communication makes doing business easier, and the process of audit confirmation is no exception.
Ease of use leads to more opportunities
For his fellow Rehmann associates in the assurance department, Pruim doesn’t have to do much for new Confirmation users beyond providing login credentials and giving a quick overview of the interface. “The system works seamlessly and is very user-friendly. Most of our associates and clients learn the system with just a brief five- to 10-minute training,” Pruim said.
Inspired by the ease of adoption across the audit team, Confirmation has presented an opportunity for Pruim’s team to look at new ways of utilizing technology to increase efficiencies. “We’re preparing to make entering of confirmations and mass-batch downloads for each client more of a pooled task, more of an administrative task. Confirmation will really allow us to utilize our time differently. For example, if an associate has an unassigned day in the office in November or December, they can request the authorizations for all of the upcoming audits for the entire office and initiate these confirmations in advance. This allows the task of confirming accounts to be completed before we start the audit fieldwork. Also, relying on administrative staff to perform these tasks frees up our associates’ time to be better spent on value-added services for our clients.”
"The system works seamlessly
and is very user-friendly."
Strategic Analyst, Rehmann
Brent Pruim
Results by the numbers
While using Confirmation, Rehmann has increased its annual totals of asset, liability, and security confirmations completed by 13% to 20% or more each year, without additional staff dedicated to the process.
While the firm doesn’t have hard numbers for time savings, Pruim notes, “The response time for a confirmation is extremely fast–we’ll have some within 24 hours, and that’s where the real time savings comes from. There’s a lot less back and forth. We complete thousands of confirmations per year, so if we’re saving an hour on each one, that’s huge. For clients with 20, sometimes more than 30, accounts, we’re taking what’s essentially a decentralized, time-consuming process and putting it into a very centralized, structured process. For those larger accounts, it’s amazing how much time you can save.”