Audit and Financial Reporting: New Skills, New Challenges

From FEINew technologies are rapidly transforming the finance function as many manual tasks are automated and digital resources can be used to analyze an overwhelming flood of data. Whether it is robotic process automation (RPA), blockchain or artificial intelligence (AI), senior-level financial leaders are beginning an important transformation of their profession through technology.

And while much has been advertised about the impact of tech broadly on finance, there is also a renaissance that is digitally transforming its two most core functions: auditing and financial reporting.

In this series, the Financial Education & Research Foundation (FERF) collaborated with Deloitte & Touche LLP to speak with industry leaders regarding efforts to help transform the financial reporting and audit process through new technologies.

This series, along with an associated survey of 135 Financial Executives International members, provides these key takeaways for senior-level financial executives who may be seeking to understand technology and the audit of the future:

  • Collaboration is essential: Financial executives are enthusiastic about applying additional technology resources to financial reporting and audit work, but it may require that the external auditors be a step-by-step participant in the process.
  • Cloud tech and audit testing lead the way: When it comes to the digital process, the use of cloud platforms has been widely adopted and performing audit testing has outpaced the other audit processes when it comes to leveraging technology.
  • Confidence in staff, but perhaps not data: Management believes current staff have the ability to incorporate new technologies into the finance function, but a majority of financial executives are unsure of the quality of the underlying data.


Part 2: 


Digitalization is rapidly changing all forms of the finance function, including audit. The Financial Education and Research Foundation (FERF) surveyed Financial Executives International members and discovered that senior-level executives are overseeing a rapid evolution of the audit.
In order to understand where technology is taking audit & accounting today we spoke to Deloitte and Touche LLP’s Amy Park. Amy Park is an audit and assurance partner in Deloitte’s National Office Accounting and Reporting Services specializing in technical accounting matters relating to consolidation, financial instruments, and lease accounting. She also serves on the AICPA’s Digital Assets Task Force, focusing on accounting matters. Amy previously served as a practice fellow at the Financial Accounting Standards Board.
Financial Education and Research Foundation: How do accounting standards need to evolve with the adoption of technology?

AMY PARK: Evolving technology has a widespread impact on the entire accounting ecosystem. Companies adopt different technologies for their businesses, auditors not only evaluate their clients’ use of those technologies but also use different technologies to innovate their audits, investors use technology to digest and understand financial reporting, regulators evaluate technology used by those it regulates. Standard-setters are not shielded by the expansion of technology. They, too, evaluate whether existing standards are appropriate or need to evolve with the adoption of technology.
The Financial Accounting Standards Board (FASB) is the standard-setting body that establishes generally accepted accounting principles in the US. Since technology has resulted in new types of assets and arrangements that previously did not exist, the FASB assesses whether US GAAP has any “gaps” in accounting related to new technologies. For example, the FASB issued ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract, which amended the accounting for internal-use software to incorporate cloud computing arrangements. The FASB, through its Emerging Issues Task Force (EITF), recognized challenges by companies that were implementing cloud computing within their organizations, specifically how to account for the related implementation costs. Existing GAAP on internal-use software provided a basic framework, but amendments were necessary to address the nuances and increased use of cloud computing arrangements.
Technology may result in new assets and arrangements where existing accounting standards may not provide an appropriate framework. For example, the FASB has an open agenda request related to the accounting for cryptocurrencies, such as bitcoin. The AICPA has created a working group to address emerging accounting and auditing questions related to digital assets given the uniqueness of transactions involving these assets. In December 2019, the AICPA working group issued a practice aid that provides nonauthoritative guidance on accounting for digital assets[1].
The need for change in accounting standards is not limited to the US. Internationally, other standard-setters are faced with the same challenges responding to technological change. The Accounting Standards Board of Japan (ASBJ) recently issued an accounting standard for cryptocurrencies. On the other hand, although the International Accounting Standards Board (IASB) has decided not to add a project to its technical agenda for cryptocurrencies as recommended by the International Financial Reporting Interpretations Committee (IFRIC), the IFRIC agenda decision discussed how current IFRS Standards would be applied to holdings of cryptocurrencies[2].
As technology continues to evolve, standard-setters will be faced with the challenge to create accounting standards that will stand the test of time with the rapid pace of change in technology by its stakeholders.
FERF: Where do you see significant gains to be made in the audit process as a result of new technologies in terms of quality, value or insights?
PARK: New technologies will transform the audit of the future and result in significant gains to quality and value delivered to clients. By leveraging technology-enabled solutions, we can more easily pinpoint risks that help focus our audit effort where it matters most. Coupled with increased efficiencies, auditors can provide more value-added insights for their clients to consider through advanced data analytics. Audit analytics help interpret massive data sets to deliver smaller subsets of high-value data for the auditor to evaluate, improving both audit quality as well as the value of business insights an auditor is able to deliver. New audit tools and use of technology, such as artificial intelligence, along with data analytics, help auditors to enhance risk- assessment and identify trends which may lead to a more effective and efficient audit.
New technologies provide (1) greater transparency through near-real-time analysis and identification of deviations, (2) accessibility through larger volumes of data and (3) greater precision through the ability to identify trends and anomalies in an entire population of data rather than traditional sampling techniques. The benefits in the audit process from new technologies and access to greater amounts of data ultimately benefit companies.
FERF: How can preparers gain greater certainty around the quality of their accounting and operational data?
PARK: The quality of a company’s accounting and operational data is largely dependent on the reliability of this information, which becomes increasingly challenging with a larger volume of data. Unreliable data, in any situation, will yield unreliable results. To achieve this, companies should consider security, completeness and consistency. Security: The onset of cloud computing solutions and storage of data requires safeguarding these systems and data from unauthorized access and cyberattacks. Companies need to implement processes to keep data safe and reliable, and reduce the risk of data manipulation and unauthorized access. Completeness: Incomplete data could reduce the value of the data by generating false positives with outliers, trends, etc. Manual processes should include logic to ensure all data is submitted. Technology has allowed companies to include functionalities which automatically reconcile data populations. Consistency: Not only is the completeness of the data critical, but consistency in how the data is entered and interpreted is also important. Standardization of processes and data input fields, for example through the use of drop-down fields, can result in consistent data across an organization.
FERF: How different will today’s audit process look 10 years from now in terms of resources, such as personnel and technology.
PARK: Resources utilized in the audit process, both from a personnel and technology perspective, have changed over the past 10 years, and will continue to change in the future. The greater volume and higher quality of data now available has allowed auditors to respond by implementing more focused analytical procedures. With this change, the composition of the traditional audit team will also change, calling upon different skill sets and educational backgrounds than those traditionally recruited by public accounting organizations. There will be a greater emphasis on the ability to work with large sets of data and a statistical background, but an accounting background will also continue to be critical. A key will be to find personnel who can manage, interpret and draw conclusions from a data set, and also evaluate the impact of those conclusions on the financial statements. Artificial intelligence can reduce the need for certain traditional auditor skill sets that were oftentimes time-consuming. Even as audits become more automated, human auditors will continue to play an important, but potentially different, role as artificial intelligence augments human intelligence and doesn’t replace humans. Some will engage closely with advanced audit analytics and automation systems. Others will assess high-level outcomes of automated and semi-automated audit processes. And they will undoubtedly continue to deliver value by evaluating key assumptions, appropriately challenging conclusions with professional skepticism, and adding value to the overall financial reporting process.

Read more here

About the author




Are you

Tell your story on our

Follow CFO Talks

CFO Talks

Quick links

The Workspace at The Club
Cnr Pinaster Avenue and 18th Street
The Club Shopping Centre, Second Floor
South Africa

The Workspace
Melrose Arch
44 Melrose Boulevard
South Africa

Tel. 012-643-1800 |

Scroll to Top