Professional accountants, including auditors, are facing a new world of technology that is rapidly changing how they and their companies do business.
Not only must they understand the opportunities and risks of tech developments such as blockchain, cryptocurrencies and artificial intelligence, but they also must adapt to the automation of many audit functions.
“It’s the early days,” said Will Auchincloss, who heads the advisory and analytics department at PRGX Global Inc. (Nasdaq: PRGX). “There’s a lot of excitement, and I’d say uncoordinated research and uncoordinated initiatives, going on with a lot of companies to figure out blockchain, but there’s a pretty strong belief that it is going to have a profound impact.”
That impact will change the way companies handle their supply chain and their business in general, he said.
For industries such as retail, blockchain technology will mean far greater insight into transactions, as large amounts of data becomes both accessible and transactionable.
“It will enable you to understand every single transaction, so in theory, you should not be able to make an erroneous payment anymore,” said David Brown, PRGX Global’s vice president for global audit strategy.
While the long-term impact of technology on the audit department is likely to be vast, adoption of these concepts is likely to be slow, said Auchincloss.
“They’re going to be very careful about it, but there is a lot of interest and investigation going on right now,” he added.
As products like Bitcoin have garnered headlines, some companies have moved quickly to embrace the bottom-line potential of cryptocurrencies and blockchain technology.
Blockchain, an open-source distributed database or ledger using secure state-of-the-art cryptography, can facilitate collaboration and tracking of many types of transactions. It offers companies potentially far-reaching advantages, such as allowing retailers to gain unprecedented insight into their supply chain and vendor transactions.
In addition, artificial intelligence (AI) is taking over many functions currently done by human auditors.
Technology is changing the way even smaller firms do business. Accounting firm Deloitte recently launched its Auvenir Audit Smarter platform for small firms, which uses cloud-based storage, machine learning and AI to improve workflow and collaboration between auditors and their clients.
Cryptocurrencies, which are made possible by blockchain, can pose challenges, as companies and auditors discover there is relatively little in the way of best practices or guidance from regulatory agencies or professional bodies. The legal environment for Bitcoin and its brethren can be contradictory, depending on the country or the government agency, said Sabrina C. Serafin, partner at Frazier & Deeter, a company of certified professional accountants (CPAs) and advisors.
“Depending on the industry, blockchain could be a game changer [or an] industry killer,” she said. “Cryptocurrency could facilitate another line of business or it could eliminate a line of business.”
Internal auditors must educate their organization’s boards and management about where to allocate resources to these technologies, as well as the risks they may pose, added Serafin, also vice president of programs for the Atlanta chapter of the Institute of Internal Auditors.
“The fact that it’s very technical, and very new and rapidly growing, some firms are trying to decide if it’s just a fad,” said Kell Canty, CEO & co-founder of Verady, a provider of cryptocurrency accounting and audit technology services. Many companies, he said, are hesitant to move forward without clear direction. “There are other more innovative firms that look at it and say, ‘This is a great innovation and we want to be part of the forefront of helping hammer out these issues.’ We have clients coming to us that really need our type of financial advice in how to deal with all this great growth they’re experiencing with this new technology.”
“We can really be empowered to bring to light some of the emerging technologies and their potential effects to management,” she said. “At the same time, we have the insight into an organization and their primary controls and ongoing strategy.”
“Maybe even sprinkling some AI on top of that, where you have robo accounting with blockchain securely connecting the client and the auditing firm,” said Canty.
Many lower-level functions of the internal audit, such as sampling, could be eliminated due to robo accounting or AI, according to Serafin.
“If you’re able to leverage AI to minimize — and in some cases even eliminate — risk, you’ve got auditors who may or may not have the skills to perform procedures,” she added.
Automation allows firms to “focus on the human advisory role,” said Canty.
“It’s not like you’re losing a job. You’re being freed from more mechanical work and able to offer higher level functions.”