Introduction
An audit is generally performed to get “reasonable assurance” and to check if the financial statements are accurate and are as per the regulatory guidelines.
The audit is important as it helps in:
- Prevention of frauds.
- Credibility & Reliability.
- Enhancing the financial health of the company.
- Helps in identifying potential issues.
- Improves the overall effectiveness of the company.
The Changing Landscape of Audit
Nowadays companies are using software, storing data online (cloud computing) and even there could be a case where the client has outsourced some of its processes to a third party.
For example, if the client uses customer relationship Management then the auditor needs to understand how this CRM works. If the client is taking help from a third party for an internal audit outsourcing service, then the auditors might prepare SOC Reports for the same.
Traditional Approaches of Audit
The audit team starts with risk assessment and then forms the audit plan. Post this, the auditors collect and analyze the evidence required to complete the audit. Also, there could be other client information required by the auditors. At last, the auditors express their opinion in the audit report.
Modern Approaches of Audit
Now with the enhancement in technology and developments in software, the auditors are moving to CAATS (Computer Assisted Audit Techniques). One of the major reasons why auditors are moving towards CAATs is that they are efficient, more accurate, time-saving, and have no biases involved.
Auditors might need to format according to the software and input the parameters then it will select the required samples.
Market Trends Shaping Audit
Currently, the remote audit is growing. This is because, nowadays technology has enabled us to work from far geographical locations by having the required software, Internet connection, and servers, such that one team is working with the client and the other team is assisting and working from far away could be another country or continent.
Remote audits save cost, and time of traveling, and work is completed within the deadlines and while the quality of the work is maintained. On the other hand, Outsource bookkeeping services in India have become increasingly popular for such remote operations due to their cost-effectiveness and high-quality delivery.
The Human Element in Audit
The human element in auditing is a critical aspect that emphasizes the irreplaceable value of human judgment and experience. To further elaborate, we have discussed the role of expertise and how an expert can balance the use of technology with critical analysis.
The Role of Expertise
We cannot say that human judgement is replaceable as there could be a possibility, that the software cannot identify fraud or error in the given data and auditors could find out.
Auditors need to plan the audit, allocate work, get in touch with the client when required, make judgements, and most importantly use professional skepticism which alone AI cannot handle everything from start to end. Auditors using their judgement along with using technology can make the audit process effective and efficient while meeting the deadlines.
Balancing technology with expert analysis
Too much relying on either of them is harmful and could lead to errors. The knowledge and expertise of the auditor play a major role.
Having experience with the client, the senior auditor knows the high-risk areas and what could go wrong, and the senior auditor will plan the audit accordingly and use the software as well if required.
Best Practices for Effective Internal Audit
There are a few tips for conducting successful audits :
- Set goals & allocate work
- Maintain work tracker
- Take daily updates from the team
- Maintain effective communication
- Timely review of the work of teammates and also check the quality of the work
- Make sure software and servers are all updated to the most recent versions
- Provide training to the team for new updates/changes or new software
The Importance of Collaboration, Transparency, and Information Sharing
Collaboration: It means getting new people together and forming a team, which will have new skills, talents, expertise, and experience to make the audit effective and efficient.
Transparency: Maintaining Transparency will not only help auditors in maintaining a smooth internal audit but will also provide transparency to the stakeholders and the client. There will be clarity on how the audit is being conducted stating the parameters and giving reasons for making the opinion.
Information Sharing: Sharing information is part of clear and effective communication, where they should be sharing information regarding risks, internal controls, processes, what could go wrong, and any important event or transaction that is considered material and important in making decisions.
Role of Experienced Professionals and Specialized Expertise
Having experienced professionals and specialized expertise in the audit team is important as they not only guide but also help in situations when there is some challenge during the internal audit. Experienced professionals not only handle complex situations but also provide the team with the best possible solution.
