Role of Technology in Auditing Function

This report presents the significance of technological development in the auditing profession. The use of technology in the modern times for the purpose of performance of audit engagement has offered the auditing professionals an opportunity to enhance the scope of audit with more focus on the quality of audit. The report discusses the current and future position of audit and technology, change in the role of auditors, and issues faced while using technology in audit.

Running Head: Role of technology in auditing function
Audit and Technology

Role of technology in auditing function 1
Abstract:
This report presents the significance of technological development in the auditing profession.
The basic objective of and audit is to enable the auditor to provide an opinion on the true and
fair view of financial statements of the client organisation. While performing the audit
engagement an auditor has to carry out various audit procedures to gather sufficient and
appropriate audit evidences. Traditionally, the auditor conducts sample audit testing to
achieve the purpose of audit under which only a part of entire population is checked and
verified. However, with the introduction of various technologies such as Artificial
Intelligence, Blockchains and Data Analytics analysis and checking of 100% transactions
have become practical and easier. The entire population could be checked within minimum
time and with accuracy through the use of audit software. However, even the use of audit
tools and software does not alter the auditor’s integral role of provision of opinion by
applying the professional judgement.

Role of technology in auditing function 2

Role of technology in auditing function 3
Table of Contents
Abstract:................................................................................................................................................1
Introduction:..........................................................................................................................................3
Current position of audit and technology:.............................................................................................4
Future position of audit:........................................................................................................................5
Change in the role of auditors:..............................................................................................................6
Issues faced while using technology in audit.........................................................................................7
Conclusion:............................................................................................................................................8
References:............................................................................................................................................9

Role of technology in auditing function 4
Introduction:
The technological advancement in the modern times has become the game changer for the
auditing profession. There are various technologies that have evolved over a period of time
which have changed the nature and processes of audit to great extent. Those technologies are
Artificial intelligence, Blockchain, Data analytics and so on. The introduction of said
technologies has provided a significant boon to the auditors since the past few years. The
traditional audit procedures involved a combined risk assessment through the use of
substantive procedures and the test of internal controls (ICAEW, 2018 b). Before the
introduction of the said technologies, the auditor used to carry audit procedures merely on the
selected transactions which were chosen as the audit samples representing the entire
population of transactions due to involvement of huge volume of data and limited availability
of time to complete the audit engagement. However, the introduction of technologies like
data analytics has enabled the auditors to test the entire population of transactions and not
merely the samples. Robotic Process Automation is already being deployed in the audit
processes execution especially in the areas of revenue or payroll testing (PCAOB, 2017).
Data analytics innovation has allowed the auditors to take the helicopter view as well as the
detailed and overall view of financial information in order to provide an opinion on the true
and fair view of the financial statements prepared by the client entity of the auditor. To make
use of technology in the auditing profession, the auditors must have sound knowledge of IT
skills, data science and they must possess strong data analytical skills. The use of nom-
cognitive technology has allowed the auditors to gather and analyse the information relevant
for auditing purposes from various non-traditional sources such as social media sites, internet
and determine whether such information that is raised from external sources affect the audit
directly or indirectly (Al-Qudah, Baniahmad & Al-Fawaerah, 2013). Going beyond the limits
of client’s data allows the auditor to gather as well as make analysis of the relevant industry

Role of technology in auditing function 5
data that was not easily accessible prior to the technological developments. This facilitates
the auditors to identify the information outliers in the better way and thereby enhancing their
capability of generation of clear business insights so as to enable them to emphasize on
operational business risk as well risk related to the financial reporting function of the client
organisation. Through the use of technologies such as digital science and artificial
intelligence has made the decision aspects on part of auditor highly digitised. The clients of
the auditing firms have also adopted the accounting software such as ERP packages in the
wake of technological advancement which in turn has enabled the audit professionals to
quickly process, highlight as well as extract the key information from the electronic
documents maintained by such client (Moorthy, et. al., 2011).
Current position of audit and technology:
The use of technology in the modern times for the purpose of performance of audit
engagement has offered the auditing professionals an opportunity to enhance the scope of
audit with more focus on the quality of audit. The combination of different technologies such
as big data analytics, visualisation technologies have provided the auditors to obtain audit as
well as business related insights that have the impact on the manner in which audit is planned
and executed. The recent developments in audit have enabled the auditor to adopt forward
looking approach while performing the audit engagement. Previously, the use of analytics
was simply made to undertake substantive audit procedures. In such cases, the auditor used to
collect information relevant to the particular account balance so as to validate its accuracy
and existence. For this purpose audits had to collect, select and analyse the sample chosen.
However, in the modern times, auditors begins with collection of audit relevant information
in the earlier phases of audit so as to make use of such information in deciding the audit
scope and defining the procedures related to audit risk assessment and planning of entire
audit function. The technological innovation has the transformative effect on the auditing and

Role of technology in auditing function 6
assurance services and has given the opportunity to the auditors to perform their professional
responsibilities in such a way that meets the expectations of the regulators of audit profession
as well as the investors and clients. However, the machine learning as well as artificial
intelligence has still not reached at the stage where these technologies could completely
replace the human inputs. The way the audit is currently carried will significantly be changed
in long-term future.
Future position of audit:
The audit technological revolution has certainly being welcomed and entertained by many
corporations. As per the report issued as a result of Forbes Insights survey it has been
believed that the technology will have significant impact on the audit function in the
upcoming 3 to 5 years (ICAEW, 2018 a). In future, the technology will continue to reduce the
requirement of clerical and manual vouching requirements which will certain enhance the
efficiency of audit procedures. It is obvious to say that technologies like data analytics have
eased out the accessibility of the data however the fact cannot be denied that intervention of
human intervention will still be required to extract and classify the data and to communicate
as well providing opinion. The move from continuous control monitoring (CCM) to
continuous transaction monitoring (CTM) is taking place at the client side in real time with a
creation of copy for the auditors under Blockchain technology. Further, since the audit in the
world of technological advancement has enabled the auditor to undertaken the checking of
each and every transaction and due to which the auditor will have the responsibility to detect
frauds and errors. The use of technologies in audit will facilitate the audit firms to cut-down
the time that is required to conclude an audit engagement. In the coming decades, the audit
function will be concluded within the fraction of time if complete accessibility of real time
data is given to the auditors. Presently, the audit fees is being charged on the basis of time
consumed in conducting the overall audit process but the basis will no longer remain relevant

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with the technological development. The fees will be charged on the basis of knowledge of
auditor, auditor’s capability to mitigate the risk of the organisation and acting as the advisory
body to the organisation and its stakeholders (Tarek, et. al., 2017). The audit testing work has
been changed by far from mere sample checking to 100% checking of the transactions and
from historic testing to the real-time testing on account of introduction of various
technologies in the areas of auditing (Forbes, 2016). With the said changes, there will be the
change in the billing system from hourly or time basis to the quantum of digital assets used in
the provision of auditing and assurance services. The relationship between the auditors and
their clients will be strengthened as they will be offered the customised services alongside
audit services.
Change in the role of auditors:
Although it is correct to say that the role of auditor has significantly been influenced and will
be influenced further with the advancement of technologies in the areas of provision of
auditing and assurance services (Kolk, 2017). However, it cannot be denied that the auditors
will remain the integral part of audit process despite of introduction of new technologies and
procedures. Technology is certainly a way of improving and enhancing the quality as well as
the time of communication between the auditing professional and the client but at the time it
is important to understand that such technology cannot be implemented by itself (EY, 2015).
For the implementation and execution of such advanced technologies, the auditors are
required to possess higher degree of IT skills, knowledge of auditing concepts and
procedures, knowledge about use of computer etc. It can be said that the role of auditors will
be reduced as a result of adoption of technologies but their roles will not go off air
completely. Though, the detection of errors and frauds will become easier on the completely
digitised auditing platform but the auditors will be placed at more responsibility to detect
each type of error or misstatement in the financial statements (Chang, et. al., 2016). The

Role of technology in auditing function 8
auditors will have the role of smooth implementation and usage of auditing software such as
Continuous aided audit tools while performing the audit engagement on the financial
statements of the client entity. They will have to consistently monitor the functioning of such
audit software and tools while using them in the auditing function (Grant, 2003).
Issues faced while using technology in audit
Although the use of technology will bring numerous opportunities in the auditing profession
but at the same time the auditing firms will have to face various issues and challenges while
making use of technologies in the provision of their professional auditing and assurance
services. Those challenges are discussed as below:
The use of technology in the performance of professional auditing services will require the
auditor to acquire and adopt various auditing software, tools as well as the techniques such as
CAAT systems, use of artificial intelligence, blockchains, data analytics etc. All these
investments will require huge sums of money to be spent. Cyber-security is one of the major
concerns which are to be taken into mind by the auditing professionals before adopting the
technology for the performance of their audit functions. As the use of artificial intelligence or
other auditing tools are available on the online platform called cloud, the use of such
resources requires high amount of cyber-security in order to protect the valuable and sensitive
data of the client organisations from being lost or manipulated or damaged completely.
Whenever data is taken to the online platform it becomes more vulnerable to the different sort
of IT risks (Marx & Dijkman, 2009). Therefore it is necessary for the auditing professionals
to understand and identify the ways of managing the risk of data-loss while making use of
technologies. The resistance to change is another important issue which has to be dealt with
while adopting the advanced auditing tools and software. It is difficult for the auditors to
make their mind to switch from the traditional auditing procedures to the audit procedures

Role of technology in auditing function 9
that are undertaken by making use of audit technologies. Further, it is also important for the
auditing professionals to possess requisite knowledge and expertise in the areas of
information technology before adopting any audit related technology. Also, the auditor must
have sound knowledge of IT risk management along with the relevant experience in the said
areas. Implementation of any sort of audit technology will require large sums of investment
in acquiring the auditing software as well in the training and development of audit team
(Styhre, 2016).
Conclusion:
In today’s world, technology is playing a huge role in advancing the world and the economic
development of different countries. In the rapidly changing world, it is important for the
auditing professionals to maintain pace with the technological advancements. The auditors of
the companies must understand the significance of technology in the auditing professions and
hence they must proactively take part in the adoption of technology while providing their
professional services. Though the use of technologies such as artificial intelligence, data
analytics, audit software will certainly change the way of audit but the importance of human
intervention in auditing function will not be lost as the auditing function would still require
the use of human judgement while providing the audit opinion. In the technology enabled era,
it will become easier for the auditors to carry out the audit on the entire population and
thereby identifying and reporting about each and every error encountered during the process
of audit. The time of carrying out the audit procedures will definitely be reduced by the use of
audit software and there will be lesser room for any negligence or mistake in the conduct of
audit. Also, the efficiency of auditing function will be enhanced with the use of technologies
as more data will be audited in minimum possible time given the complete accessibility to the
real time data of the client organisation.

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References:
Al-Qudah, A. A., Baniahmad, A. Y., & Al-Fawaerah, N. (2013). The Impact of Information
Technology on the Auditing Profession.
Chang, W. C., Chen, Y. S., Chou, L. T. L., & Ko, C. H. (2016). Audit partner disciplinary
actions and financial restatements. Abacus, 52(2), 286-318.
EY. (2015). The future of assurance How technology is transforming the audit. Retrieved
from: https://www.ey.com/Publication/vwLUAssets/EY-emeia-fso-assurance-
viewpoint-technology/$FILE/EY-emeia-fso-assurance-viewpoint-technology.pdf
Forbes. (2016). How Technology Is Transforming the Audit. Retrieved from:
https://www.forbes.com/sites/kpmg/2016/11/23/how-technology-is-transforming-the-
audit/#5a38b647716c
Grant, P. (2003). Technology cannot replace auditors. Retrieved from:
https://www.accountancyage.com/aa/news/1769435/technology-replace-auditors
ICAEW. (2018) a. The Future of Audit: Technology. Retrieved from:
https://www.icaew.com/technical/audit-and-assurance/faculty/the-future-of-audit/the-
future-of-audit-technology
ICAEW. (2018) b. Understanding The Impact Of Technology In Audit And Finance.
Retrieved from:
https://www.icaew.com/-/media/corporate/files/middle-east-hub/understanding-the-
impact-of-technology-in-audit-and-finance.ashx

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Kolk, K. (2017). The role of auditors and information technology. Retrieved from:
https://theses.ubn.ru.nl/bitstream/handle/123456789/4414/Kolk%2C_Kirsten_1.pdf?
sequence=1
Marx, B., & Dijkman, J. (2009). Challenges facing the modern day auditing
profession. Retrieved from: https://www.accountancysa.org.za/challenges-facing-the-
modern-day-auditing-profession/
Moorthy, M. K., Mohamed, A. S. Z., Gopalan, M., & San, L. H. (2011). The impact of
information technology on internal auditing. African Journal of Business
Management, 5(9), 3523-3539.
PCAOB. (2017). Technology and the Audit of Today and Tomorrow. Retrieved from:
https://pcaobus.org/News/Speech/Pages/Harris-statement-PCAOB-AAA-4-20-
17.aspx
Styhre, A. (2016). Knowledge sharing in professions: roles and identity in expert
communities. Routledge.
Tarek, M., Mohamed, E. K., Hussain, M. M., & Basuony, M. A. (2017). The implication of
information technology on the audit profession in developing country: Extent of use
and perceived importance. International Journal of Accounting & Information
Management, 25(2), 237-255.