Technological Innovations in Audit and Assurance: Big Four Analysis

This essay analyzes the impact of technological innovations such as artificial intelligence (AI), data analytics, and blockchain on auditing functions, particularly within the Big Four firms (Deloitte, EY, PwC, and KPMG). It highlights how these firms are adopting technologies like cognitive techniques and cloud computing to enhance efficiency, improve testing, and detect fraud. The essay also discusses future trends, including staffing changes, the emergence of digital hubs, and the use of drones and robotic software in auditing. While technology offers significant benefits, the essay emphasizes that it cannot replace the auditor’s knowledge, judgment, and professional skepticism. Desklib provides access to similar essays and study resources for students.

AUDIT AND ASSURANCE 1
With the increased developments in the technological innovations in the fields of
artificial intelligence (AI), data analytics and block chain technologies, the auditing functions
have significantly enhanced over the years (Issa, Sun and Vasarhelyi, 2016). There are clear
benefits of the impacts on technology and professional bodies and regulators are increasingly
relying on the various tools and techniques for carrying out the audit functions. The following
work is aimed at analysing the various aspects of the technological impact on the audit as
used by the big four firms across various audit functions.
The big four firms namely Deloitte, EY, PricewaterhouseCoopers (PwC) and KPMG
are the biggest service providers in the auditing and accounting industry having various
branches and subsidiaries across the globe. One of the major attributes of the services of these
large scale service providers is the large amount of data that needs to compile to be assessed,
which leads these entities to continuously embrace innovations (Raphael, 2017). For instance,
KPMG has partnered with IBM in the year 2016, in the adoption of the cognitive techniques
towards attaining audit assurance (KPMG, 2019). One of the key terms that has become the
buzzword in the industry is the ‘Know Your Data’ (KYD). The term has gained more
significance over the ‘Know Your Client’ (KYC) in recent years in the finance and
accounting profession. In addition, the development in cloud computing and cloud storage
have further opened up the possibilities of collecting and analysing data on a previously
unimaginable scale. The said technologies allows the auditors to collect and analyse broader
industry data sets that were previously beyond the reach. The artificial intelligence usage
signifies algorithms learning how to do things such as statistical analysis of large amounts of
data, classify the same and predict values of the same. Block chain is foundational concept in
the way the data is stored. It refers to a complex system of consensus and verification to
generate a single agreed upon permanent record (Dai and Vasarhelyi, 2017). Thus, it is a
method of ‘universal entry bookkeeping where there is sharing of the data with the
participants.
Some of the positive impacts of the use of the technology in the auditing functions are
elaborated as follows. The technology leads to enhanced efficiency by facilitation of the audit
fieldwork by the automation of the time-consuming manual and clerical tasks (Salijeni,
Samsonova-Taddei and Turley, 2019). An instance of the technology usage is the interface
creation between the audit client’s systems to facilitate the automatic transfer of the compile
data. Another major impact is in the form of the improved testing to gain deeper insight into
the company’s operations. This further enables the timely and better analysis of the clients’

AUDIT AND ASSURANCE 2
trends and risks against industry standards. Another powerful use case for data analytics is in
fraud detection. The data analytics enables the auditors to identify risks very easily and
perform recalculations in the high risk areas thereby facilitating the comparisons.
Some of the future trends that may be led in the field of auditing by the increased use
of technology are explained as follows. There is expected to be staffing changes in the form
of increased demand for the skilled auditors, leading to an increase in salaries to attract and
retain experienced, high-level staff. Yet another future trend that is emerging on the lines of
financial technological advancement is the introduction of the digital hubs which serve as
“smart platforms,” enabling the auditors to work remote locations, in real time inculcating the
techniques of automation and visualization (Forbes, 2018). The trends are working in favour
of drones, mechanical robots, and robotic software processes towards the augmentation and
assistance and even replacement in certain cases in even the auditing industry.
As per the discussions carried on the previous parts, it can be stated that the audit
firms are consistently investing in new technologies and tools to facilitate their varied areas
of the work. These technologies help these organisations to address the assurance demands in
high volume transaction operational environments. Thus, the sampling methods of the
auditing and assurance must be done even more efficiently in the wake of issues of fraud or
money laundering. However, one important thing that must be noted that no matter how
efficient these tools may be, they cannot substitute the auditor’s knowledge, judgment and
exercise of professional scepticism.

AUDIT AND ASSURANCE 3
References
Dai, J. and Vasarhelyi, M. A. (2017) Toward blockchain-based accounting and assurance.
Journal of Information Systems, 31(3), pp. 5-21.
Forbes (2018) Three Technologies That Will Change The Face Of Auditing [online]
Available from: https://www.forbes.com/sites/insights-kpmg/2018/07/16/three-
technologies-that-will-change-the-face-of-auditing/#4b1805dd7544 [Accessed on:
16/04/2019].
Issa, H., Sun, T. and Vasarhelyi, M. A. (2016) Research ideas for artificial intelligence in
auditing: The formalization of audit and workforce supplementation. Journal of
Emerging Technologies in Accounting, 13(2), pp. 1-20.
KPMG (2018) Shaping the future of audit through technology [online] Available from:
https://home.kpmg/mt/en/home/insights/2018/06/shaping-the-future-of-audit-through-
technology.html?
utm_source=Mondaq&utm_medium=syndication&utm_campaign=View-Original
[Accessed on: 16/04/2019].
Raphael, J. (2017) Rethinking the Audit: Innovation Is Transforming How Audits Are
Conducted-and Even What It Means to Be an Auditor. Journal of Accountancy,
223(4), p. 28.
Salijeni, G., Samsonova-Taddei, A. and Turley, S. (2019) Big Data and changes in audit
technology: contemplating a research agenda. Accounting and Business Research,
49(1), pp. 95-119.