Hello, my name is Gillian Bowen. This is Small Firm, Big Impact.
We need to track advancement ...keep ourselves ready for the new developments. We need to work together to ensure the new technologies are implemented effectively and ethically.
I think one of the biggest challenges is the necessary skills, um, within the workforce and also time and capacity.
It's the podcast giving Chartered Accountants the up to date information they need to do their jobs. Each episode I share resources, tools and expert advice provided by Chartered Accountants Australia and New Zealand and a range of people across our profession. So get following the pod in your favourite
podcast app. Let's start a conversation. Today we have Steven Watson, Managing Director at National Audits Group, and Masood Mahmood, Senior Policy Advocate in the audit and assurance team at Chartered Accountants Australia and New Zealand. The topic: the cutting edge
advancements transforming the audit profession. We're going to dive into the world of advanced technologies in audit, which includes discussing how AI, automation and other innovative tools are revolutionising the audit process and enhancing efficiency and ensuring higher quality outcomes. We're going to look at the opportunities and challenges for audit firms, especially smaller size practices, and unpack how to
stay competitive. And as usual on my podcast episodes, we're going to highlight a new CA ANZ resource The audit and technology playbook A practitioner's guide. Steven and Masood welcome to Small Firm, Big Impact.
Thanks for having me today. It's great to be here.
Thanks, Gill.
Okay. This is going to be a really interesting discussion. And to help set it up, Masood I thought I'd talk to you first. Can you give us an overview of the advanced technologies currently being used in audits?
Thanks, Gill. Honestly, the audit profession is really stepping up, tapping into some amazing technologies. This is transforming into efficient audit, smarter insights and greater impacts. Let's start with artificial intelligence and machine learning. These are absolutely excelling in predictive analytics and detecting anomalies. It's a game changer. Then we have cybersecurity. It's massive, huge focus right now with the growing cyber
threat on the rise, everyone knows why it's important. So you need to be having a best tech on your side. Next is the Internet of Things. Imagine all smart devices talking to each other, moving data in real time. No human hands needed. This is like a whole system thinking on its own. Then there is robotic process automation, which uses software bots for repetitive tasks, freeing human resources for a better and useful work. Next, we have blockchain technology.
This ensures secure and transparent transaction. This is like a tamper proof digital ledger. Lastly, big data and analytics are truly amazing for uncovering trends and patterns in huge data sets, giving us deeper insight into business operations. Bottom line, auditing is moving fast and it's leading the change.
Mhm. Mhm. Okay then Steven to you from your perspective how are these technologies that, the ones that Masood's talking about, how are they transforming the audit process?
Um I might just talk about the, I suppose practical technologies from a client communication and management perspective and how they have really transformed the audit to and client relationship, um, and allows things to be really streamlined, um, and to be able to get access to the client data in
real time, um, instead of a static data set. We're able to access that data and look at the data sets, um, turn unstructured data into very structured data so that we can analyze that and determine our audit techniques and processes
quite efficiently. We've also adapted the use of artificial intelligence when it comes to Gen AI, and how that's being used in the audit assessment from a risk perspective, but also a planning perspective and allowing our auditors to really understand the client at their environment and how they can determine the specific risks to address as part of the audit process.
Mhm. Okay. All right. So then Masood, back to you in in what ways have advanced technologies improved the quality and accuracy of the output?
It's fascinating, Gill, how audit has evolved over the years due to the advanced technologies. First off, smart software, AI and machine learning, it's helping to reduce the manual errors instead of human combing through endless data manually, AI can analyse massive set of data, instantly spotting patterns and red flags and variations. So this would have easily slipped through the cracks before. We've got optical character recognition technology, which is
transforming the messy, time consuming data entry task. So we don't need to retype scan documents and it doesn't stop there. Data analytics tools are giving auditors real time insights into client operations, not just surface level checks, but deep dives, strength in fraud detection and risk assessment. AI and machine learning tools even learn from their data over time, meaning their accuracy keeps getting sharper every time on every engagement.
On top of that, as Steven mentioned, Gen AI and natural language processing tools are transforming research and compliance work. This will help us to access the standards, regulations and best practices. Is now faster and more precise. And let's not forget about the cloud technology. With real time teamwork and data sharing, we are cutting down on miscommunications, lost files and version control issues, all of which takes so much of time. So better tool, sharper insights and stronger outcomes.
I like that aspect as well. Of cutting down the manual are bits and pieces that people are having to do then. So, Steven, can you share some specific examples or case studies perhaps where this technology has made a significant difference?
Yeah, I certainly can. I can probably give you two examples, and it's really driven by the data from the revenue of our clients. So one example is an alcohol retailer and it's basically a marketer across a group. There's 2800 outlets across Australia and them getting access to their point of sale data on a timely basis, which drives their revenue.
It gives them the insights and the tools that they need to be able to reconcile their revenue data and also make decisions based on that from our perspective as an auditor, um, looking at the controls surrounding that data, um, and the timeliness of it, because they basically moved from, I think it was six weeks to reconcile their data after month end to basically three days, um, just because
the technology that they've adopted. And I probably just wanted to put a point there in terms of emphasising, um, the auditors really working with their clients so that the client data is as clean and accurate as possible. Uh, another example is a roadside assistance service. Um, and they're basically dealing with a mountain of data. Um, previously they once again, it took them probably four weeks to reconcile that data after year end and basically just a matter of hours, um,
after after year end. So what that gives the auditor is a lot more confidence, um, in the data coming through. Um, and we can rely on that a lot more and spend time elsewhere um, in terms of the audit process.
What's the tech they're using power BI.
Okay, so Microsoft Power BI in the example of the alcohol retailer they invested, I think it was around $14 million over a 4 to 5 year period about ten years ago. Basically that whole project had to be scrapped because the technology advanced that quickly. Wow. They could get access to Microsoft buy off the shelf.
Wow. Hopefully no one crashed while listening to that, those figures. So there are risks then that that come through with using tech. And and especially as things evolve so rapidly as you've just talked about there, Steven, what are those key risks associated with the use of advanced tech in audit and and perhaps, perhaps keeping in mind that there there could be automation bias or overreliance on the technology?
Yeah, there's certainly security risks over the data. Um, and I'd probably recommend that all firms really make that a priority in terms of their cybersecurity at the firm level, but also make significant recommendations through their audit, management letters and communications with relevant boards or management that they need to address that cybersecurity threat and bring in consultants, whether firms have got those expertise in-house, or recommend outside consultants
to come in and strengthen the security around that data in terms of information bias or from the the technology. I think there's got to be a level of professional skepticism over the the data that's coming through and the information and really questioning the or placing reliance on the data. So you really need to look at the controls around how that data is compiled, how how it's accessed, and
basically how it's reported. And over time, you can build that reliance up by by looking at those specific controls.
Um, we would no doubt have some resources on cyber security that our members can access. So I will track down some links to, uh, bits and pieces that are relevant here and put them in the episode notes for those listening along. But Masood, building on that, how can auditors ensure that human oversight and how can they ensure that it remains a priority while also leveraging the new tech?
Oh, I think it's a very important question. And if I, if I, if I think about what Steven has given the examples, I think it's very critical to maintain a careful balance between, you know, the adoption of technologies and the application of human oversight. Auditors must exercise professional skepticism and sound judgment when interpreting the outputs of these technologies.
For instance, while AI is highly effective in progressing large volumes of data, it cannot replicate the understanding, critical thinking, and context driven ... insights that experience auditor bring. Auditor must also be mindful of the inherent limitations of these technologies, and ensuring that audit judgments are never unduly influenced by
flawed or incomplete information. Now, both the IAASB and IESBA have recognised the existence of this automation bias as an example of unconscious auditor bias that practitioners need to be aware of when exercising professional judgment. Additional auditors must adhere to highest ethical standards, including confidentiality, confidentiality, integrity, and objectivity. And I think with the right balance of technology and human insights, the future of auditing is bright and transformational.
I do love putting an IESBA link in my episode show notes. So I will I will get those off you, Masood, and will put them in so that they're easily accessible for those who are listening along, if they want to refresh their memory. Steveen, then what are some of the biggest challenges auditors face when integrating this in this advanced tech into their work?
I think one of the biggest challenges is the necessary skills, um, within the workforce and also time and capacity, um, and to have the bandwidth to have the.
I think that's a fair word. You've got you've kind of got to have the headspace to sit down and go, right. What do I, what what what do I need to learn here? What do I not know? What questions do I need to ask?
Most definitely. And with all the competing priorities and deadlines, um, it's it's quite difficult to take the time to invest. Um, so I think firms really need to have a clear strategy, um, and the capacity, um, so they need to invest in more people, resources, um, and bringing in external consultants who may have the necessary skills and resources to do it,
the implementation quite efficiently and effectively. Um, on the skills side, um, I think firms really need to change their strategy in terms of, you know, what are the skill set of their auditors are and probably have more of a mindset around it, cybersecurity, but also moving into the ESG space and getting access to that data. Um, and, you know, how are we going to be able to audit that? So really need to look forward, not back, and really
adapt to the new technology. Another key obstacle, um, is really the change management across the workforce. Um, and making sure that a positive light is placed on being progressive, um, across your team, um, and, you know, continually sharing those wins in terms of efficiency gains, um, you know, what it looks like in terms of working smarter, not harder.
Um, yeah. That's right. So giving a clear example of the results of actually embracing this because it is hard to embrace change that might blow your mind.
Yeah. Most definitely.
Um, look, um, Masood then thinking of smaller practices. I mean, they they are, um. Hello out there. They are many of the wonderful listeners of this podcast. How can they overcome these challenges that Steven's talking about? To fully leverage the benefits of these new technologies?
Uh, I think Steven has touched on some of the key points in his response. So I mean, by taking a strategic approach of technology integration, smaller practices that can absolutely overcome these challenges at a firm level, it's crucial to establish governance and oversight for acquiring and developing and then implementing and then using technologies. That means investing in scalable and adaptable technologies, tools that can actually grow and
evolve alongside the firm. This involves confirming that technology meets the requirements. I mean, you just don't blindly bring in technology. You should understand and tested the technology, not for smaller practices. This might not be possible. And, uh, and that's the point where they need to take necessary steps to ensure that the audit firm and the audit teams are in control of technology being used as they are properly trained.
And I should also mention here that the International Standard on Quality Management also outline a comprehensive framework for managing quality within the audit firm. And this will definitely help. The other key focus area, as Steven mentioned, is that the continuous skill development that's that's the key. And remember that, you know, that's the technology change is not just about system. It's it's about the people as well.
Um, now there will be people listening along going, this is all well and good, but how do I know where do I go to start? And the good news is, is that CA and ACCA have developed a guide, a playbook that provides practical guidance for audit firms, especially small and medium sized practices. So, Masood, with that in mind, can you highlight some of the most important insights or recommendations from the guide?
Absolutely. I think the playbook offers several key insights, recommendations for specifically for the SMP. And I think that's the great way of letting our members know that, you know, this is available. The playbook outlines key technology trends that are currently influencing the enterprise landscape. It also provides practical examples. Some of them Steven just mentioned, and how technologies like AI and machine learning and data analytics can be used
to improve audit outputs and efficiency. And then it talks about some of the relevance to the specifically relevance to SMPs. And at the end of the the the the the playbook, there is a section which is most importantly, it lays down the roadmap for the firms to develop a comprehensive
technology strategy with clear digital transformation. Now this includes, uh, again, I mean, Steven mentioned a clear change management program that actually aligns with their own technology technology strategy, and it involves staff in key decision making processes. You need to remember that there will when you are implementing technology, there will always be a group which is which is causing some sort of a resistance so you need to take along those people. Uh, you need to take people along
with you. Um, on, on, on, on these sort of a journey. And, and this highlights the engagement with, with your external IT specialist, your vendor, uh, CA ANZ community could be helpful because there might be other SMPs who might, uh, who would have been on the same journey before. The roadmap emphasises the need for robust governance and guidelines to manage the ethical and professional implications, as well as, uh,
the importance of constant skills development. Additional integrating AI ... into the audit process, actually position these small firms as an attractive workplace and this will solve the other issue we have been talking on the on some of the other uh, publications through CA ANZ is that, you know, the talent shortage. Yes. Uh, overall, I think it's a it's a valuable resource for the SMP looking to navigate a rapidly changing landscape in other technology.
I do like a checklist. I do like a plan, and I do like clear communication. And so of course, there'll be a link to that in the show notes. So then a final thought from you, Steven, because we're about to run out of time and I, I do like to keep these episodes around 20 minutes or less. How how do you see all of this being applied by by audit firms? And I'm happy for you to touch on the sorts of things that they're not thinking
about that they need to think about. And this is why that they should do it.
I think there really needs to be a focus on the client and the relationship, um, and working with the client to be able to get robust, um, data coming through so that we can actually use that with the artificial intelligence and the technology that's available. Um, also through the use of better and more timely recommendations with their clients. Um, so if the client can be doing something more efficiently or effectively, um, then we can obviously do our audit
much more effectively and efficiently as well. Um, and it needs to be a clear, as Masood mentioned before, there needs to be a clear investment in additional training and resources, especially in the use of gen AI. I know that CA ANZ has recently rolled out some specific AI training programs which look quite attractive. Um, so I would highly recommend jumping on the CAA ANZ website and having a look at those courses that are available.
Yeah, that's a really good point. Steven and I will make sure I put a link to those, uh, in the episode notes as, as well. Look, before we wrap up, then, a final thought from both of you about, um, about this space and the sorts of opportunities it really, Um. It really presents to the profession. Masood.
Oh. Thanks, Gill. Uh, I think few few years ago, when we published our 2019 report, the use of AI and machine learning was in its infancy. Fast forward now everyone is using it. It's part of our day to day lives and businesses. Yeah. And this tells us the the technology is accelerating rapidly. And the technologies we mentioned at the beginning of this episode would remain relevant. On top of that, the, uh, we need to track advancement or keep ourselves ready for the new developments and aware
the risk associated. I'll just give a little example of Agentic AI, which is a new, new thing in it.... This is this is, uh, kind of your specific hired bot, uh, or an AI assistant tool, which you can deploy onto any function and which will work for you for the rest of the time until it's deployed. So and a very, very recently developed tool. The other part is the collaboration between different stakeholders is is absolutely
critical for the successful integration of these advanced technologies. Audit auditors, professional bodies like CA ANZ, technology providers and regulators. We need to work together to ensure the new technologies are implemented effectively and ethically. At the same time, the audit firms have a critical role in developing the next generation of auditors, and the next generation of auditors must be agile and technological fluent not just the data and analytics,
but also AI and emerging trend. So I think by taking a proactive approach, firms can stay competitive. And with this collaboration, this can truly make a difference and it will take us where we want.
So opportunities to be excited about I feel rather than nervous about. Steven, what's your final thoughts?
The key points to take away from this session is probably to have a clear focus and strategy in terms of the adoption of the future technologies, and have that willingness to change and adapt to these new technologies, and continually communicating that with your team, but also your clients.
With the advancements of technology, obviously come efficiencies. Therefore, you should have more time to focus on key audit areas that necessarily didn't get the necessary time in the past, probably with the time savings that you get from, uh, in terms of the human intervention, um, can then be applied with the adoption of this technology into the to the audit process, because it will come at an additional
cost from a software perspective. Um, however, you can then balance that with the savings in your human capital.
So again, more more opportunities. I like that look. That is all. We have time for some valuable insights there on the power of advanced technologies in audit. It's clear that these innovations are reshaping the audit landscape and offering exciting opportunities for firms of all sizes. For our listeners, don't forget to check out the guide and other resources available there on the Chartered Accountants Australia and New Zealand website, and I will put useful links in the episode description.
As always, if you want to get in touch with the podcast, email us: [email protected] and follow the podcast in your favourite podcast app. We're in all of them. Let's start a conversation. Thank you Steven and Masood for being my experts on Small Firm, Big Impact.
Thank you Gillian.
Thanks, Gill.
Bye bye.