Technology in audit: More than a numbers game

Remember finding out you could use a calculator for your high school algebra test? A calculator can do some amazing things with numbers, but the thing is, you still had to input the correct numbers for it to solve the equation.

Technology has come a long way since the handheld calculator, and you’ve come a long way since high school algebra. But for some auditors looking to use technology to increase efficiency in their audit procedures, the equation remains unsolved.

“None of these things are rocket science,” Liz Gantnier, CPA, CGMA, a partner at FORVIS, said during a session at AICPA & CIMA ENGAGE 2023 in Las Vegas. “Yet, it’s not happening. Something is still a barrier.”

A technological transformation is happening at FORVIS and many other firms, but only after they overcame doubts and took leaps of faith, which now serve as examples to reluctant firms with cold feet (See the sidebar “Signs of Tech Growth in Auditing,” below).

Technology comes with a cost, both in terms of money and time, but with a little planning, the numbers should add up in your firm’s favor.

What’s truly important is figuring out how to eliminate barriers and move from planning to practice.

BARRIER NO. 1: UPFRONT COSTS AND DELAYED BENEFITS

Can we afford it?

Gantnier said technology upgrades have netted “a payback in spades” at FORVIS. Yet, she readily admitted that not all the financial benefits were in the cards right away.

“It’s not without a little bit of pain on the front end,” Gantnier said. “We didn’t get the payback in the first day and we didn’t get the payback in the first week, and we probably didn’t get the payback even in the first season for a couple of these.”

But patience can pay off.

“We need to think through the cost-benefit analysis,” Sara Watson, CPA, director of the A&A Professional Standards Group at FORVIS, implored attendees during her panel discussion at ENGAGE. “Are you all as firm leaders willing to say, ‘We as a firm need to adopt this technology, try something new, and maybe in this first year or maybe even the first two years, I’m not going to see the ROI on that?’

“But really think ahead. It’s maybe not just about what you can do today or what savings you can get on that technology today. It’s what opportunities, what new clients are you able to go win and do work for just by virtue of the fact that you have embraced new technology? It’s part about cost savings today; it’s part about new opportunities to grow your business in the future.”

Watson did warn firms to keep maintenance costs in mind when calculating the bottom-line impact of a new technology, quoting research estimating that maintenance costs can account for 40% to 80% of total costs.

It’s important to ask the right questions of vendors — existing ones as well as potential new ones.

“There are a lot of core commercial vendors that you’re probably already working with, maybe for your audit platform, your core audit technology, and they have add-on services, they have other things that they can offer you, probably at some sort of discount,” Watson said. “Leverage what you already have so you don’t have to go and buy everything brand-new.”

BARRIER NO. 2: CHANGE FATIGUE

Can we handle more change?

Watson quoted recent research that said more than 7 in 10 employees feel overwhelmed by change fatigue. At the same time, nearly 8 in 10 expect constant change to continue into the future.

“I think we can all agree that change fatigue is a real problem, probably in most of our firms,” Watson said. “I know I certainly feel it.”

For assistance in battling change fatigue, Watson cited serial tech company entrepreneur Yoav Kutner’s “Five Steps to Successful Technology Change Management”:

Set and communicate clear goals.

1. Build a team.
2. Define a strategy.
3. Plan for resistance.
4. Ensure continuous improvement.

“Obviously, communication is really important,” Watson said, “but I think it’s even more important to consider when you’re communicating. Make sure you communicate before the change happens, and I think we’re probably really good at that. Communicate while the change is happening. I think most of us are decent at that. But I think where we drop the ball sometimes is communicating after the change.

“Look back on what happened. Did the change go well? If so, why? If not, why not? Let’s learn from that so that as you attempt to implement more changes in the future, knowing that change is a constant, you’ll be better prepared to do that.”

BARRIER NO. 3: LACK OF LEADERSHIP

Do we have someone to champion new tech implementation?

A big part of helping your team handle the addition of technology in audits is to have a leader who has a total handle on the task at hand, including facilitating training and adding needed infrastructure, which are the biggest barriers to using tech in audit.

“Using the champion model has been successful for a lot of firms,” Watson said. “It’s finding those change advocates, those super-users, those people who are really passionate about technology within your organization and helping them lead the charge.”

Gantnier offered her description of the type of person who can head up the effort. “What I find is just sometimes it’s a recommitment that has to happen by leadership or by your A&A head partner or by somebody who’s just frustrated and willing to invest some time for the greater good,” she said. “It’s whether or not you’re willing to invest the time and effort for the long-haul gain.”

You need only to visualize the calculator you used in high school to realize that change is constant. But with a cohesive plan for implanting new technology into the audit, your firm can ace the test.

SIGNS OF TECH GROWTH IN AUDITING

As the capability of technology in the audit space grows, so does the appetite for technology products.

That was evident at the AICPA & CIMA ENGAGE 2023 conference, where more than 600 people attended a pair of sessions focused on applying technology to audits.

The second session featured discussion of the AICPA Auditing Standards Board Technology Working Group’s new practice aid, Use of Technology in an Audit of Financial Statements.

The aid not only demonstrates how a traditional risk assessment under Statement on Auditing Standards No. 145 can produce a technically accurate result, but it also shows a technology-enabled assessment of the same information can produce an accurate result that also unearths valuable insights for the entity and for subsequent audits — often in less time.

Liz Gantnier, CPA, CGMA, a partner at FORVIS, said each firm must decide for itself what specific software solutions it chooses for engagements, but she shared what has worked for FORVIS:

• Electronic working papers: While Gantnier’s firm supports the AICPA’s Dynamic Audit Solution (DAS), it currently uses CaseWare to digitize its audit working papers.
• Kira: This electronic reading software features artificial intelligence that learns over time via your feedback on its findings across various document types. “The beauty of Kira and all these types of software is that the interface, the user interface, is unbelievably great,” Gantnier said. “As the supervisor or partner needing to review this, I have this gorgeous document on my screen.”
• MindBridge: “Ingest the general ledger into MindBridge, and MindBridge uses about a thousand different algorithms and looks for anomalies in journal entries and in transactions and spits back to you a report,” Gantnier said, adding that not all the anomalies will prove risky in nature.
• DataSnipper: “You’ve got 75 invoices that you need to vouch. You create a folder with a PDF of each of those invoices. You load those invoices into DataSnipper. You tell DataSnipper that you want to look at the date, you want to look at the invoice amount. […] DataSnipper lays them next to each other, gives you an extract of all the information that you’re looking through.”
• Model Manager: A “nice little addendum to Excel,” Gantnier said, that “does monetary unit sampling, things like that.”
• Microsoft Excel: Speaks for itself.

About the author

Bryan Strickland is a senior news writer for AICPA & CIMA, together as the Association of International Certified Professional Accountants.

LEARNING RESOURCES

Use of Technology in an Audit of Financial Statements – Risk Assessment

Learn to increase the efficiency, effectiveness, and quality of your risk assessment procedures as required under SAS No. 145 by using technology and automated tools and techniques. 2 CPE hours. Offered on Nov. 15 and Dec. 13.

WEBCAST

Transformative Skills Pack — Digital Mindset

Expand your skill set and make better strategic decisions by leveraging data analytics, data visualization, cybersecurity, and other digital tools.

CPE SELF-STUDY

For more information or to make a purchase, go to aicpa-cima.com/cpe-learning or call the Institute at 888-777-7077.

AICPA & CIMA RESOURCES

Video

“Using Technology in Financial Statement Audits,” AICPA & CIMA News, Aug. 3, 2023.