What audit committees should know about how their external auditors integrate technology to promote continuous improvement, enhance audit quality for a more seamless experience.
One of the responsibilities core to the audit committee’s overarching purpose—monitoring the integrity of a company’s financial reporting—is keeping tabs on the work of their external auditor. To that end, audit committees must know what to look for in their external auditors’ technical capabilities and commitment to quality. Given how technology is interwoven into every aspect of business, they should also confirm that their auditors are integrating technology innovation to enhance audit quality and efficiency. That means asking auditors how they are investing in new technology tools, new ways of working, new training and digital upskilling to continuously reinvent the audit and drive improvement.
COVID-19 underscored how important it is for external auditors to be able to proceed seamlessly with audit activity even in the face of major disruptions, so they can perform the audit and review procedures remotely. The restrictions implemented to slow the virus’s spread will eventually lessen, however audit committees’ responsibility to confirm that their external auditors are prioritizing continuous improvement and audit quality will remain constant.
Here are five questions to consider when evaluating your external auditor’s capabilities to find out if (and how) technology is improving their ability to serve your company’s needs.
A variety of tech tools are making audits more efficient, to give auditors more time to focus on resolving any issues that arise—a cornerstone of enhancing audit quality. So it’s worth asking yourself the following questions:
Does our auditor employ AI that can “read” financial data quickly and accurately, allowing them to customize the risk assessment they use to guide the scope of the audit?
Can they use technology to detect anomalies or trends using all of our financial data—not just samples—so problem areas can be uncovered more accurately and efficiently?
Can our auditor offer a tool that allows for secure communication, coordination, and information sharing between our company and their teams to eliminate the need to keep track of countless emails and which provides us with real-time status updates? These technologies, combined with other virtual meeting tools, help make communications between internal teams and those of the external auditor more efficient and organized.
It’s now possible for external auditors to connect securely to a number of enterprise resource planning systems to view and extract more comprehensive sets of company data (not just samples) without manual intervention and customize the audit plan accordingly.
The technologies described above can automate manual tasks and streamline workflow and communications, reducing the time internal staff have to spend chasing down information or monitoring progress. This also helps the project and issues management process to proceed smoothly.
The skills and knowledge traditional auditors have alone are no longer enough to deliver the greatest value. Auditors who have been given specialized technology training and who have been empowered to apply that knowledge in their work can develop custom automations to create a whole new level of efficiency and enhanced quality for each audit. Ask yourself: Is our auditor combining tech know-how and financial knowledge and experience to enhance the accuracy and quality of our audit? Automations typically grow out of the desire to address specific audit matters—like having to manually comb through hundreds of Excel files full of pivot tables—but once created, the automations can be applied more broadly (or in different ways) to other similar tasks to enhance audit processes.
If an auditor can pull company data directly from an internal ERP system to perform analyses and present the data in a visual, dynamic way—rather than viewing data in spreadsheets or other static formats—that makes it easier to explore trends or delve deeper into the data.
If companies prize continuous improvement and demonstrable commitment to audit quality—and they should—audit committees need a clear understanding of exactly what their external auditor is doing to achieve those aims. Technology is only part of the answer, but you won’t know if your auditor is making smart use of it if you don’t ask the right questions.