The financial audit of the future might be cheaper, simpler and require less time for public companies.
New technologies could affect the millions of dollars in fees that public companies pay their auditors along with the staff and resources that companies devote to the audit, said Maria Moats, U.S. audit and assurance leader for PwC, who spoke with reporters at the firm’s New York office.
Public companies want to know about the evolving audit technologies and techniques and how they will help them. And the firms are responding.
“We believe it’s important that we talk to our clients about what we are doing and take their input and adjust as needed,” Moats said.
PwC, also known as PricewaterhouseCoopers LLP, like its competitors, has invested hundreds of millions of dollars to streamline and standardize the audit, improvements that benefit clients and auditors alike. The new audit tools are also expected to improve the effectiveness of the audit, putting more reliable financial statements in the hands of investors.
Advancements in audit technology have shaved hours off the time it takes to prepare for an audit and complete certain steps within the audit. Eventually, the total time needed to complete the audit could shrink, and possibly the cost as well.
Audit fees will reflect the firm’s investment and effort involved to perform the audit, Moats said. How quickly fees might decrease “depends on how fast we go on this journey together with our clients.”
Products that simplify communications with public-company clients are part of that effort.
Those products include colorful digital dashboards that allow companies and auditors to track an audit’s progress. Email alerts provide updates or reminders. Other digital platforms give audit clients the ability to upload data, documents, and files or respond to requests from auditors.
An artificial intelligence tool, not yet in use for clients, will scan general ledgers, looking for anomalies or outliers that might require additional testing.
Accounting firms have generally provided few specifics about the state of their audit technology, said Jay Thibodeau, an accounting professor at Bentley University who studies audit technology.
“I think they see the potential for competitive advantage,” Thibodeau recently told Bloomberg Tax.
Under Pressure to Improve
The largest global network firms also are under pressure to improve the effectiveness of their audit work as quality has plateaued in the U.S. after years of steady improvement.
Calls to break up the Big Four firms in the U.K. have renewed attention on the audit industry and the relevance of the financial audit to capital markets.
The demonstration gave PwC the chance to share publicly steps it is taking to improve audit quality and address concerns about the cost to comply with U.S. audit regulations.
“We’re all trying to achieve a better quality financial reporting,” Moats said. “Here’s how we’re going about it.”
Stakeholders from finance executives to audit committees all want to talk about the shift to a digital audit and what those new capabilities mean for the time they spend on the audit and the effectiveness of the audit, said Scott Zimmerman, assurance innovation digital leader for Ernst & Young LLP.
“They put a lot of work into it. It’s a big deal to them,” Zimmerman told Bloomberg Tax.
The landscape has shifted in the past 18 months as EY rolled out its cloud-based portal to clients and audit teams worldwide, along with a suite of advanced analytic tools. Meanwhile, companies are re-engineering their own finance systems, making it even easier for the firm to access the data it needs, he said.
“Digital is here to stay,” Zimmerman said. “If we’re going to provide a differential, high quality audit experience, it’s got to be digital.”