A New Technology Solution for Data-Driven Audits

Erik Asgeirsson:  We’re at an inflection point in the financial statement audit. Emerging technologies allow us to reimagine how we perform the audit — what we look at, when we look at it and how we look at it — to provide greater insights and value to the client. The profession’s largest firms realize this opportunity and are investing heavily in the adoption of new technology-enabled approaches to the audit. However, the level of investment required to custom-develop solutions can be too expensive. Leaders from many of the top 100 U.S. firms said that there’s a need for a solution to help firms of all sizes perform audits of all complexity levels and embrace the chance to leverage technology in the audit space. These firms asked if we could create a solution that would help propel the entire profession forward, and pledged funding and resources to the initiative.

This feedback was the impetus for what we’re calling the Dynamic Audit Solution (DAS). DAS is a partnership among the AICPA, CPA.com, leading CPA firms and our technology partner, CaseWare International, to develop a data-driven, technology-enabled audit solution that will enhance the efficiency, quality and value of audits.

2. What exactly is the Dynamic Audit Solution and what will it do?

Sue Coffey: First, it’s important to recognize that when we look to create a solution to transform the audit, we can’t just focus on technology. Technology is an enabler. Automating what we do today is not the solution. We must also look at the evolution of methodology and the relating auditing standards. The combination of emerging technologies and reimagining the audit, via a new methodology, will distinguish the profession and position it for continued success. I’m also pleased to see the Auditing Standards Board’s (ASB) agenda is highly focused on the use and application of emerging technologies during the audit. Its Audit Evidence project, for example, is just one element of its aggressive agenda to modernize the audit. I’m further pleased to see firms identifying the new skills needed for success and investing in their talent to address a growing gap in digital intelligence, critical thinking and people skills.

With these key drivers in mind, we’ve engaged top talent from across the profession, as well as CaseWare International, to help us reimagine the audit and develop a new solution from the ground up. This fully integrated solution will use data analytics and artificial intelligence to analyze entire populations of data to identify relationships and patterns that may not be intuitive to humans, to transform risk assessment and for use across all phases of the audit. It will also employ sophisticated algorithms, continuously improved by machine learning and other variations of artificial intelligence, to detect anomalies and irregularities in business information.

3. Who will benefit from DAS?

SC:  The profession is developing DAS for the profession. The objective is to enable firms of all sizes to bring greater quality, efficiency and value to their audits. Scalability is a foundational principle in our development process.

4. How does DAS fit with the OnPoint PCR solution introduced in 2018?

EA: OnPoint PCR is a preparation, compilation and review (PCR) tool that integrates AICPA guidance into the CaseWare Cloud Smart Engagement platform and incorporates some of the more foundational DAS components. Right now, 19,000 firms across the United States offer preparation, compilation and review engagements as their highest level of service. Our vision is that, once DAS is commercially available, firms that offer audit and PCR engagements will have access to a single, integrated platform to meet their needs. The platform will include modules that firms can select based on their engagements and specialized industries.

5. Will firms using DAS know about changes in audit or peer review standards before the public or have an advantage in the peer review process?

SC: No. The standard-setting and peer review administration processes are independent of DAS development. The ASB is looking at how standards might need to evolve in light of technological innovation, but DAS won’t drive these efforts. The DAS team doesn’t have early or exclusive notice of changes in standards. Similarly, firms that will use the DAS will have no more or no less advantage in peer review.

6. When will DAS be available?

EA: We’re developing DAS following an agile development process, which means we’ll test initial prototypes or offerings with firms and then adapting the solution based on the feedback collected. The first commercial parts are expected to be released to firms working on the DAS project later this year, with the first commercial release expected in 2021. As we continue to gather feedback from firms, we’ll adjust and refine the solution to make sure it brings optimal value.

We’ll be starting with the core commercial audit and then will add in industries and additional functionality over time through a process of continuous improvement and innovation.

7. What opportunities is DAS bringing to the profession?

SC:  Since our announcement about this initiative, there’s been a new excitement and energy in the audit space. Firms are eager to have a tool that will allow them to leverage new technologies and methodology in the delivery of the audit.  Eventually, DAS will also support the delivery of attestation and advisory engagements for firms that are evolving their services beyond the traditional financial statement audit. The world has become more complex. Businesses are looking for assurance in new areas, such as data and information integrity, sustainability and System and Organization Controls (SOC) reporting, which includes reporting on cybersecurity risk management.

Want to learn more about the Dynamic Audit Solution? Listen to this Accounting Today podcast with Erik and Sue.

Originally published by the AICPA.