Auditors of the future — what are the skills needed in a digital age?
Over the last decades we have seen the digitalisation of our environment, which progresses at an increasing speed. Creating and using data has become a daily aspect of our lives, including for auditors. Mike Suffield is the Director of Professional Insights at the Association of Chartered Certified Accountants (ACCA) and prior to that worked at the National Audit Office of the UK. He explains how the changing audit environment, as influenced by technology, is shaping the audit profession and identifies which skills are needed for auditors to be future proof.
By Mike Suffield, Association of Chartered Certified Accountants (ACCA)
ACCA’s take on a changing audit profession
Like many parts of our personal and working lives, the power of digital is extending its reach to the audit function. Data drives our lives, and the audit profession is not immune from this fact. This is as relevant to the audit of public services, which are currently undergoing a fast digital transformation, as it is to purely commercial entities.
To examine this fast-developing environment, the Association of Chartered Certified Accountants (ACCA) has published in June 2019 a report called ‘Audit and Technology’, together with the Chartered Accountants of Australia and New Zealand (CA ANZ)(see Box 1).
Box 1 — ‘Audit and Technology’ — a report by ACCA and CA ANZ
This report provides an overview of the various technologies currently affecting or likely to affect the audit profession soon. We developed this report so we could better understand this future and explain what it means for auditors. In this report, we were able to explore this, with the human relationship between client and auditor emphasised, because this remains important for the audit.
The report also provides an understanding of how the changing audit environment is shaping technological change in auditing — summarising how different technologies could be expected to impact its future and what this means for auditors as people.
Ultimately, Audit and Technology provides insights for both organisations and auditors themselves on how they may adapt most effectively in the face of significant change. Supported by existing research, panel discussions held in Greece, Czech Republic and Slovakia and by interviews with leading practitioners, the report details the latest advances in technology — many of which promise significant benefits for the audit profession.
.Data and drivers of change
As with all technological developments, there are several key drivers signalling the need for technological change in audit. Such drivers include the rapid increase in the sheer volume of data, the changes in business models, the shift towards automation and the demand for a proactive and forward-looking approach to audit.
This is equally the case with new digital ways in which public services are delivered, and in which public service entities are dealing with taxpayers, service users and broader stakeholders. Measuring the value of technologically-enabled and delivered public services presents new challenges to public auditors engaged in performance audit work. These developments mean that auditors need to be technologically sound to enable them to continue servicing businesses and to execute high quality audits.
Such technologies include distributed ledger technology (DLT), data analytics, robotic process automation (RPA), drones technology, artificial intelligence (AI) and machine learning (ML), natural language processing (NLP), and deep learning (DL). The ACCA’s report also touches upon smart contracts and cloud technologies.
In the era of Big Data, the structured information accessible to auditors is only a fragment or an abstraction of the much wider universe of data. But this ‘dark matter’ exists in unstructured formats: the ability of DL to analyse a range of internal and external sources means that Big Data can potentially supply complementary audit evidence and feed into the narrative requirements of audit.
Auditor’s adaptability is a must
Our research found that auditors need to adapt to the changes in their clients’ delivery models, including the need to understand the various technologies used. Data analytics was found to be the most mature of the technologies currently used by most audit firms, while machine learning is still not at the stage where it is embedded in everyday audit practice.
Taken as a whole, technology is also a catalyst that will help shift the focus of the audit process from a retrospective view to one which is prospective. Key findings in the report revealed:
- auditors need to adapt to the changes in business models;
- among the available technologies, data analytics is currently the most mature and is currently used by most firms;
- the audit profession is still at a very early stage with AI and has not embedded it as deeply as it could;
- the human relationship between client and auditor remains important: not everything can be replaced by technology;
- auditors will need to be more adaptable to change in future.
Technology offers the ability both to improve the quality of audit and to add value to it: audit is moving from being a reactive, backward-looking exercise to a proactive, predictive, forward-looking one, working in real time. It provides an opportunity to help clients by providing timely insights. Even in its traditional context, technology now offers an opportunity to produce higher-quality audits that better serve for their existing purpose. Nonetheless, if AI and related technologies are fully implemented, it could raise questions about the auditor’s independence.
What skills are needed for this tech future?
As part of this research, we also examined what competencies and skills would be needed in the future to manage and cope with these technological developments. Technological empowerment can be a double-edged sword. IT skills are paramount yet extremely short-lived. Even trained IT professionals who find themselves out of the workplace for an extended period rapidly suffer ‘skills erosion’ and can struggle to re-enter the workplace.
A key skill for auditors — at least during the coming years — will be the flexibility to adapt to a working environment which will continue to evolve. Employers need to be hyper-attuned to this and cannot simply delegate this to staff but will need to consider carefully the design of emerging roles.
ACCA research provides insights into the required future skills mix and how they may change, including the ‘digital quotient’, as discussed in Professional Accountants — the Future: Drivers of Change and Future Skills. This report identifies a range of quotients (see Figure 1), in addition to the traditional technical and ethical skills quotient, that are needed now and in the finance function of the future.
Figure 1 — Quotients for the future auditor
These are:
- Technical skills and ethics (TEQ): The skills and abilities to perform activities consistently to a defined standard while maintaining the highest standards of integrity, independence and scepticism.
- Intelligence (IQ): The ability to acquire and use knowledge — thinking, reasoning and solving problems.
- Creative (CQ): The ability to use existing knowledge in a new situation, to make connections, explore potential outcomes, and generate new ideas.
- Digital (DQ): The awareness and application of existing and emerging digital technologies, capabilities, practices and strategies.
- Emotional (EQ): The ability to identify your own emotions and those of others, harness and apply them to tasks, and regulate and manage them.
- Vision (VQ): The ability to anticipate future trends accurately by extrapolating existing trends and facts, and filling the gaps in knowledge by thinking innovatively.
- Experience (XQ): The ability and skills to understand customer expectations, meet desired outcomes and create value.
Communication skills will be among the most important competencies across all specialist areas and have been identified in ACCA’s research as an area where there is a large skills gap. Professional scepticism and independence will also remain important despite the role of the auditor changing in significant ways. This will be a challenge to recruiters as they seek to attract scarce talent and new personality types to an audit profession that will take some years to transition fully to new models.
Using technology to lead a changing audit profession
The auditors of the future should be technologically sound with excellent project management skills, the ability to adapt to change, adept at telling their audit narrative and aware of the technological development that can help them do their job. The role is changing, and this moment is a chance for the audit profession to use technology to lead that metamorphosis.
This article was first published on the 1/2020 issue of the ECA Journal. The contents of the interviews and the articles are the sole responsibility of the interviewees and authors and do not necessarily reflect the opinion of the European Court of Auditors.
