Audits of all varieties and types are a necessary evil in the modern business world to ensure that there is independent verification of business performance, the ethics of its’ executive team, the adherence to every rule, regulation and law; but most importantly to ensure that the confidence of customers, shareholders and suppliers is well placed.
The global audit market is huge business with the financial audit market projected to grow to US $2.23 trillion by 2023, and this figure does not include every other variety of compliance and regulatory audits, so it’s safe to say it’s very big business, very big business indeed.
But interestingly auditing remains largely unaffected by technology and is still a predominantly human-centric activity, which is a surprise as the underlying activity has been largely automated in many other aspects of the business world for many years.
The seven-year rotation of human intensive statutory auditing activity includes a costly set up process despite every previous auditing firm already having gone through this process numerous times, but little of this set up activity is ever reused by the firm taking over. This set up activity includes all the following:
- Data Identification – what information is required to perform the audit
- Data Integration – connecting with all the right data components
- Data Collation – bringing all the data together on one platform or environment
- Data Deduplication – the removal of duplicate information gathered from multiple systems
- Data Validation – ensuring the data is accurate and complete
- Data Preparation – ensuring all data is in a unified format to be presented to the auditing process
But, organisations have been doing all of these Data Manipulation activities since the advent of the Business Intelligence world 30 years ago and whilst there is little doubt these set up activities are key prerequisites, why is all the previous auditors infrastructure removed and replaced at considerable cost? Be under no illusion, auditing work for major corporations runs into hundreds of millions of dollars.
The simple answer to: Why everything is thrown away and started from scratch all over again every 7 years? is to do with compliance and checking. Was the previous auditor doing it correctly? Did the previous auditor have access to the complete and correct information? Was the previous auditor in collusion with the client to falsify the financial reporting? In fact, the list of questions goes on and on, the case of Enron - false accounting and Arthur Andersen - flawed auditing, should still burn as a beacon of what not to do, and let’s not forget these activities caused the collapse of both of these huge organisations.
But surely there must be a way to automate and validate every aspect of the Data Manipulation process within an auditing function. And this is where Robotic Process Automation comes into its own. Sitting as a central black box fully audited process, which no human being can manipulate and change means that much, if not all, of an audit set up can be fully automated, delivering a huge cost reduction. When complete it can be used by every future auditing firm with little need for replacement after the required checks of the control systems have been completed.
The deployment is easily explained using an automotive analogy familiar to every motorist. We are all used to taking our cars for a service, but the mechanic doesn’t change the engine and running gear every time you’re in the garage just because he didn’t know what the last mechanic had done. No, he plugs a laptop into the cars ECU - the control system - to check what’s been happening since the last service. He resets a few things back to factory standards, changes the oil and water, checks the emissions, puts air in the tires then gives the car a clean bill of health to be driven for another year. In other words, the mechanic performs a systems-based audit and fine tunes a few bits and pieces for the road ahead.
This approach could and should be applied to the auditing process. And even more importantly, can be applied to the auditing process.
So, once we’ve standardized and automated the confirming and validating, the replication, the parsing and segmentation, searching and replacing, finding and notifying, measuring and messaging, then we have dramatically reduced the overall set up cost of the auditing process. And as none of these activities are core domain differentiators for any audit firm then there is a little to prevent the creation of a standardized platform used by every firm and once implemented never needs to be removed. Is this a Utopian view that egotistical business leaders would never adopt? Or is it what computer systems were designed to deliver?
But further to this significant data manipulation automation cost reduction initiative, there are many other Intelligent Automation opportunities using Digital Workers across the actual auditing process itself, not just the necessary set up process.
Digital workers are already impacting every facet of the finance function, in fact finance reaps some of the biggest benefits from using Robotic Process Automation, with huge increases in productivity and dramatic cost reductions, including:
- Accounts Receivable and Payable Processing
- Operational Finance and Accounting
- Standardized Journal Entries
- Account and Bank Reconciliations
- Intercompany Reporting
- Expense Reimbursement
- Accounting Changes
- Regulatory & Management Reporting
- Financial Planning & Analysis
- And the full automated auditability of each and every activity listed above
So, the question is: What is the impact of using Robotic Process Automation on Statutory and Compliance Audits? And the answer is multi-fold:
- Standardization across all clients, all processes and potentially across all audit firms* (*Nirvana here we come)
- Automated, fully auditable processes from data identification all the way to statutory report creation without the need for manipulation and protecting against potential corruption
- Streamlining, optimizing and automating a traditionally manual and subjective activity, turning it into an automated and objective standard process
- Increasing productivity by thousands of percentages, with clients reporting 24x7 throughput gains of 20 to 25X multiples over traditional human-centric 9 to 5, 5 days per week activity
- And most of all a dramatic reduction in the cost of that necessary evil of the modern business world – independent verification.
The robots are here and they are impacting every aspect of the modern business world. They do everything they are asked to do with 100% accuracy and report exactly what has happened, even producing their own audit log of what they did during the audit process.
Robots produce an “Audit of an Audit”. Does your Auditor do that?