Embracing the Audit of the Future: How can you be a Champion of Change?

In the past few years, CPA organizations have made change the cornerstone of the profession. Attend a conference, read a publication, or look at the marketing materials of an accounting firm, and you’ll notice a significant emphasis on machine learning, automation, and navigating the technology of the future.

CPA’s have been positioned as the professionals at the forefront of this change - helping clients manage uncertain times, assessing risks in their business models, and advising on the feasibility of new capital projects. We’ve seen a remarkable rise in firms focused entirely on providing cloud-accounting advisory services, remote CFO offerings, or creating virtual accounting organizations. Accounting firms’ abilities to cultivate innovation have provided a significant benefit to their clients while creating new streams of income.

However, when it comes time for accounting firms to look inwards and assess their own software solutions, change has not been as fast as advertised. Accounting firms have more financial assurance solutions available to them than ever before – those who have embraced the innovation are positioning their practice ahead of the curve.

At Auvenir, we’ve had the privilege of talking to auditors around the globe, and it’s been fascinating to identify the commonalities that cross geographic lines. A recurring theme is that of change management – something I can appreciate as a risk-averse accountant myself. Learning to embrace change and overcome the following common hurdles of audit software implementation will allow auditors to thrive in the profession.

Getting into the cloud: Is it secure?

As is the case with any type of innovation, a very high bar is often set before users will accept something new. For audit, this apprehension is prevalent with the cloud. One of the recurring questions we get asked is if cloud-based audit tools require an on-premise server, and if the cloud is secure?

Implementing a cloud-based solution means that on-premise servers are no longer necessary; you can work from any location with internet, without the need to sync to a server or use VPN. I not-so-fondly remember competing with dozens of colleagues to sync our engagement file, sometimes waiting hours before updates and the true status of our engagements were visible. By moving to the cloud, changes are pushed instantly and reflected in all areas of your engagement, server costs are minimized, and office space is freed up. All these benefits drive efficiencies and improve collaboration.

With regards to security, the cloud is both secure and favourable to many of the current industry practices. Along with adhering to SOC2 or ISO security standards, data is encrypted, and multi-factor authentication is enabled for users. When interviewing auditors, it’s not uncommon for us to hear that client documents are sent over email, confidential information is maintained on desktops, and hard copies of engagement files are stored in boxes (sometimes in peoples’ homes). Using a cloud-based tool will better protect your confidential client documents, allowing you to benefit from maintaining digital audit documentation and collaborating with your clients virtually in a secure, centralized location.    

The very gradual rise of the robots

Every time we perform user research, we ask “what does AI, automation, and audit analytics mean to you”? For most respondents, we’ll hear: automatic sample size selection, streamlined variance and ratio analysis, journal entry testing, and more data-driven materiality calculations.

We decided to change this question to see if users’ aspirations matched with the industry excitement around this technology. We updated to the following: “If you had to build the audit software of the future, what would that look like and what tools would you have”? The results were identical.

This speaks volumes to the changes users are seeking versus the buzz in the profession. In the future of audit, we typically think of robots performing detailed substantive testing, doing 100% population matching, upending a firm’s entire business model and resources. These changes will come, but not tomorrow.

Users are looking for gradual improvements. They want workflow automation and data persistence that allows them to reduce manual referencing and input, and facilitates making more objective, data-driven decisions. With software that supports these capabilities, they can enhance their client services, improve audit quality, reduce inspection findings, and retain top talent (the audit circle of life).

An investment in workflow automation and data persistence can be a productive and low-risk first step to leveraging the nascent automated tools of the future. These changes can be made now, without uprooting a firm’s business model and operations, and with a low cost to learning.     

Calculating the ROI on your time

I’m intimately familiar with audit sentiment that “all seasons are becoming busy season.” Users are concerned about committing the time to learn new software and train staff. I’ve been in the unfortunate role of being a beta tester for a new audit tool that rolled out during busy season. While it was challenging, the software streamlined several time-consuming tasks, empowering our team to make data-driven judgments. The time spent learning the tool and training new staff was greatly outweighed by the time it saved our team in frustrating, tedious work.

Let’s use the following example to prove that investing time to acquire a cloud-based, automated workflow audit solution is a valuable return on investment. It’s the CPA Way. In fact, you should realize time savings within your first year of using such a tool. Here is a conservative calculation of the time investment:

The software needs to clear a hurdle of 2.7% to be a beneficial use of time. With cloud-based audit software, it is reasonable to expect a savings of 10-30% of your time, if not higher. This compounds annually with software improvements, further automation, and increased comfort with the tool. These time savings will allow your firm to improve margins, take on additional client work, or perhaps provide additional piece of mind. Even if you only achieve time savings of 5%, the software has saved a week of work that you could add to your next vacation.     

Next steps

Evaluating your current financial assurance software and considering improvements is not a small task, and this decision cannot be made in haste. However, the clear enhancements to quality, client service offerings, and financials should remind firms to embrace the changes underway in the profession.