The World Economic Forum (WEF) defines the Fourth Industrial Revolution as ‘The possibilities of billions of people connected by mobile devices, with unprecedented processing power, storage capacity and access to knowledge is unlimited.’ What does it mean for CAs?
The skills required to deliver an effective auditing service are undergoing fundamental change, and practitioners need to be aware of these if they wish to ensure continued relevance for themselves and, to be of value to the industry.
In the past, an auditor needed to have a good general knowledge of accounting (IFRS standards) tax knowledge, and general commercial experience. The demands of our industry have changed
Because of progress in technology, automation and innovation now play a major role in auditing and accounting. It is becoming increasingly important for auditors to embrace this, if they are to keep delivering a cutting-edge service.
Audit firms still employ hundreds of trainee accountants, who swarm over a company’s books, selecting audit samples to assess, and then work through them historically with a green pen!
A sample is not enough to provide 100% assurance. We are moving towards assessing a client’s entire set of records using technologies such as blockchain, machine learning and artificial intelligence.
These tools can cross-check every single sales or purchases item, with complete accuracy. This will make the traditional auditor redundant. To ensure we remain relevant and continue to add value in the time of automated auditing, auditors must know how to apply this technology and how to interpret the results. i.e. data analytics.
Another requirement for the auditor of the future will be critical thinking, the ability to analyse vast amounts of data, then to exercise judgement and assess risks appropriately.
Where traditionally, auditors would look to the past and assess a set of books that might be months, sometimes a year old, today these results are available much quicker and in future they may become virtually real-time. We must now become more forward looking, anticipating change, and how will it affect the numbers.
Previously, auditors were known as backroom types, churning out numbers. We will now need to show better interpersonal skills communication skills and emotional intelligence, to explain results to leaders and enable effective decision-making.
Every industry is undergoing technological disruption, and business owners and executives need good, relevant, real-time advice.
These changes to the auditing industry are already afoot. We spend much time interpreting the numbers for our clients. Tools like sensitivity analyses can help predict the impact of changes in interest rates, exchange rates and input costs. Auditors can help clients strategise for these, as long as they understand the drivers of a business.
As an auditor, a key client insight is to know what keeps them up at night. This might be a factual concern, or just a gut feeling. Many business owners operate by instinct, but that’s not to say their instincts cannot be improved through financial insights.
Given recent financial scandals, regulators are also demanding higher standards than before.
But technological empowerment notwithstanding, another fundamental part of an auditor’s make-up must be their professional ethics. We live in a society of ambitious people and role models are sometimes questionable.
As a country, we have drifted somewhat under weak leadership in several sectors – including our own, with well-reported lapses in the auditing of VBS, Steinhoff and the Gupta-related entities
Technology allows businesses and auditors to do so much more. However, it can also enable wrongdoing and manipulation as auditors, we must continually hold ourselves to a higher standard.
The auditor of the future will need several new skills and a renewed sense of urgency to keep up with the changing needs of businesses. But he or she will also require the same fundamental ethical underpinning that has always been our profession’s defining characteristic.
• Ian Scott is Managing Partner of the Cape Town office of BDO in South Africa
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