Audit evolution in action: Part 3

Transforming the auditing practice to be more digital requires more than just new tools. It also means a shift in mindset for firms serious about taking a digital-first approach. On this episode, the third in a series on audit evolution, Alan Langelli, CPA, lead partner of the technology industry services group at Aronson LLC, shares three key reasons that adopting a digital mindset is important.

Here’s Part 1, which provided an overview on the audit landscape, and here’s Part 2 on audit data analytics.

What you’ll learn from this episode:

• Why “digital mindset” is an important aspect in audit transformation.
• The type and amount of continuing professional education Langelli said was useful in the transformation.
• Some of the “low-hanging fruit” that the firm has identified.
• The advice Langelli has given to his team about this transformation being a “journey.”

Play the episode below or read the edited transcript:
 

To comment on this podcast episode or to suggest an idea for another episode, contact Neil Amato, a JofA senior editor, at Neil.Amato@aicpa-cima.com.

Transcript:                                                            

Neil Amato: Welcome back to the Journal of Accountancy podcast. This is senior editor Neil Amato, and this is Part 3 in a series on audit evolution. Today, we’re getting into a firm perspective on the value of taking a digital-first approach to auditing. I’m joined by Alan Langelli of Aronson LLC. Alan is a CPA and is the lead partner of Aronson’s technology industry services group. Alan, before we get into the specifics of the steps taken, let’s first talk about mindset. In a preview call, you used the phrase “digital mindset.” What does that mean, and why is it even more important now?

Alan Langelli: Thanks, Neil. I appreciate being here and being able to talk with you on this. From our perspective at Aronson, a digital mindset refers to a new way of thinking regarding how our work is completed and accomplished. It’s more than just digitizing a manual task. It really forces us and requires us to think about how technology broadly and then technology specifically can help us plan and execute our audits.

In terms of why it’s important, there’s at least from our perspective, three main reasons. One, when done right, technologies are clearly extremely efficient and effective and performing a number of tasks in organizing our data and allowing us to make more informed decisions better and timely. Two, if the pandemic taught us anything from a technology perspective, it’s that the pace of acceleration is increasing exponentially in terms of technologies. As a firm, you can’t be left behind. Three, as we all know as well, there is a labor shortage in terms of accounting and other professionals, and technology can be one of those solutions to help address that issue.

Amato: You do the change management part. You get people thinking more digitally. What was next in the process of transforming to that digital-first approach?

Langelli: You bring up a good point about that change management part because that is such a critical part as a firm migrates to a digital mindset, digital-first approach. You really need to lay the foundation on how it’s going to be structured, how you’re going to adopt new technologies. Because if there’s not a good structure in place, it can get very chaotic very quickly.

To that point, the first thing that we did, or two things that we’ve done, is we did about 15 hours worth of training CPEs on establishing a digital mindset for audit staff and audit team to really help them think through not just new technologies, because that’s obviously an interesting piece, but really think through how to adopt those new technologies and get us thinking on that level. Then two, from a firm perspective, we’ve also established innovation business optimization committees within each of our business units, to where all new ideas can flow so that people know that their ideas are being heard and assessed.

Amato: In the journey to a more digital audit process, what has presented itself as the low-hanging fruit, those easier opportunities that you can seize upon?

Langelli: Yeah, as boring as it might sound, one of the low-hanging fruits was actually making sure we migrated a lot of our core software solutions to the cloud. That just allowed us to operate more efficiently and effectively. Then it allows us to actually start to adopt new technologies. That was one of the first low-hanging fruit, if you will. And in fact, we did one of these core migrations right before busy season, and it worked really well.

Then on top of that, the next low-hanging fruit are really looking for those rote, static tasks, processes, [or] deliverables that don’t have a lot of nuance or don’t have a lot of change to them and finding ways to use RPA or even just some basic automation tools to prepare those in a much more efficient and effective way.

Amato: What are some examples of some of those RPA or other automation tasks?

Langelli: Yeah, good question. So what we did after or at the end of our digital mindset series was put the group to work essentially to try to identify some of those low-hanging fruit opportunities for us, for our teams that really start to analyze. Some of the items that came out of this are automating some of the standard letters that we provide to our clients, whether it’s engagement letters or post-audit letters, and really developing an automation process around that.

Another one is scanning contracts; using machine learning to scan contracts and summarize some of the key terms that are in those contracts to make the analysis a lot easier. Interestingly enough, even automating our billing process to invoice our clients to make it a more seamless, effective process, not just for our team, but actually for our client experience.

Amato: Yeah, it’s gotten to the point that clients themselves are expecting those types of services. They want things to be pretty easy, so I’m sure that matters.

Langelli: Absolutely.

Amato: What’s next in Aronson’s plans to continue on this journey to a digital audit?

Langelli: Yeah, and “journey” is definitely the right word. Because this journey is constrained by our professional standards, is constrained by the status of new technologies. Part of what’s next is always being on top of where things are in the evolution of our professional standards, in the evolution of technologies, but clearly incorporating on a much deeper level, AI, machine learning, data analytics, into our audit process. That’s the North Star right now in terms of how we can do our audits better both internally and in relating to our clients.

Some of these technologies are in various phases of development. Clearly, there are some newer just audit platforms and assurance platforms out there, OnPoint PCR, OnPoint EBP. We’re piloting those within our practice as well to really understand how they’re working so that we can change and adopt our approach accordingly.

Amato: Alan, thank you. I have enjoyed learning some more about this topic. Is there anything you’d like to add in closing?

Langelli: Yeah, this has been great to connect and talk through some of these things. What I’ll add in closing is, it really is a journey. While we have to be aware of what is taking place, I’ve cautioned our team or encouraged our team, “We have to have a sense of urgency and we also have to a sense of patience.” Blending those two together as we go through this digital mindset is of utmost importance.

Amato: Thanks again to Alan Langelli. This was Part 3 of the podcast series, or to use Alan’s words, the podcast journey on Audit Evolution in Action. Thanks for listening to the Journal of Accountancy podcast.