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Sat, Oct 12, 2024 | Rabi al-Thani 9, 1446 | DXB
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Audit Automation: Boon or Nemesis
Automation can play a major role in transforming the audit landscape in the UAE
- By
- Saad Maniar & Dr Faisal Sheikh
Automation can play a major role in transforming the audit landscape.
Audit Automation has emerged as a major trend in the accounting and auditing profession worldwide, including in the UAE. While some view automation as a boon that can streamline audit processes, enhance efficiency, and deliver superior outcomes, others consider it a nemesis that poses challenges such as job displacement, ethical concerns, and cybersecurity risks.
Understanding Automation and Key Technologies in the Audit Sphere: Automation concerns the use of technology to undertake tasks or processes with minimal human intervention. In the context of audit firms, automation covers a wide spectrum of tools and technologies that can potentially streamline audit processes, improve efficiency, and enhance accuracy.
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From basic data collection and financial analysis to report generation and compliance scrutiny, automation can play a major role in transforming the audit landscape and enabling audit firms to stay ahead of the curve in a fragile Volatile, Uncertain, Complex, Ambiguous (VUCA) world. The key automation technologies in audit include:
Robotic Process Automation (RPA): RPA automates recurring, rule-based tasks including data entry and extraction, across various audit processes. It lessens errors, improves consistency, and allows auditors to focus on value-added activities.
Cloud Computing: Cloud-based audit tools and platforms supply scalable, secure, robust, and collaborative environments for executing audits remotely. They allow data sharing, document management, and workflow automation, facilitating seamless collaboration and partnership among remotely based audit teams and clients.
Audit Management Software: Thorough audit management software rationalises audit processes, from planning and scheduling to reporting and remediation. It gathers and centralises audit activities, improves communication, and ensures compliance with audit standards and regulations.
Continuous Auditing and Monitoring: Continuous auditing and monitoring tools automate ongoing auditing processes, facilitating real-time risk assessment and detection and fraud detection. They provide timely and cutting-edge insights into potential issues, enhancing audit responsiveness and efficacy.
Data Analytics: Advanced data analytics tools allow auditors to process and analyse huge volumes of data promptly. Techniques such as data mining, advanced statistical analyses, and visualisation reveal fresh insights, trends, and outliers, resulting in enhanced audit planning, execution, and reporting.
Artificial Intelligence (AI) and Machine Learning (ML): AI and ML algorithms analyse massive datasets to identify patterns, anomalies, and trends, helping auditors in risk assessment, fraud detection, and predictive analytics. Natural Language Processing (NLP) assists the analysis of unstructured data including text documents and emails.
Blockchain Technology: Blockchain offers immutable, transparent, and decentralised ledger systems that significantly improve audit trail integrity and reliability. Auditors can use blockchain to authenticate transactions, track assets, and ensure compliance with given regulations.
Empowering professional auditors
Implementing these automation technologies can empower professional auditors perform audits more efficiently, proactively identify risks, and deliver greater value to stakeholders. Specifically, the ‘boons’ are:
Accuracy & Dependability: Automation accelerates the accuracy and reliability or dependability of audit processes by reducing if not minimising human mistakes, discrepancies, and biases. Advanced data analytics tools and artificial intelligence algorithms allow auditors to analyse huge volumes of data, identify trends, patterns, and anomalies.
Furthermore, detect and mitigate potential risks and leverage opportunities more effectively in contrast to traditional methods. In the UAE, where regulatory compliance and financial transparency are paramount, audit automation can ensure that audit reports are based on accurate, reliable, and demonstrable information, improving trust, and cementing confidence in the audit profession.
Efficiency & Productivity: Audit automation offers major advantages in terms of efficiency and productivity. Automated tools and technologies streamline audit processes, reduce manual effort, and enable auditors to focus on added-value activities such as analysis, interpretation, and strategic advisory services. In the UAE, where businesses operate in a vibrant and fast-paced environment, audit automation can ensure auditors meet tight deadlines, improve turnaround times, and supply greater timely and responsive audit services to clients.
Real-time Reporting & Business Insights: Automation enables auditors to provide clients with real-time reporting and business insights regarding their financial performance, compliance status, and operational efficiency. By automating data collection, analysis, and reporting processes, auditors can quickly construct and supply timely updates, alerts, and recommendations or proposals to clients, facilitating informed decisions in this VUCA world. In the UAE, where businesses function in a highly competitive yet lucrative market, real-time reporting and business insights can give clients a competitive edge and help them to stay ahead of the curve.
Value-added Services & Innovation: Automation allows auditors to offer value-added services such as consulting or HR and novel solutions that go above and beyond traditional compliance requirements. By leveraging automation technologies such as AI, ML, NLP and RPA, auditors can furnish clients with predictive analytics, scenario modelling, and advanced forecasting capabilities to help them better anticipate future trends and make and align strategic decisions accordingly. In the UAE, where businesses are increasingly looking for strategic advisors and trusted partners, audit automation can position auditors as thought leaders and innovators if not disruptors in the market.
Client Engagement & Retention: Automation raises client satisfaction and retention by supplying clients with timely, accurate, and value-added audit services that potentially exceed their developing requirements and expectations. By leveraging automation for data analytics, reporting, and insights delivery, auditors can enhance the overall client experience, foster stronger relationships, and build long-term loyalty and trust. In the UAE, where businesses value quality, dependability, and receptiveness, hence client satisfaction, perception and retention (Engagement) are fundamental for audit firms to maintain their competitive edge and reputation in the market.
On the other hand, automation could be a ‘nemesis’ resulting in:
Job dislocation & Upskilling Challenges: The major concern regarding audit automation is the potential for job displacement or dislocation and the need for auditors to upskill in automation-related areas. Automation tools and technologies will probably replace certain manual tasks usually performed by auditors, causing job losses and / or restructuring within audit firms. Thus, In the UAE, where the workforce is already highly skilled but may not be fully prepared for the rapid shift of technological change, job dislocation will lead to unemployment, retraining, and workforce transition.
Cyber Risk Security & Data Privacy: Automation results in cybersecurity risks and data privacy challenges associated with the collection, storage, and transmission of sensitive audit information. Auditors must engage superior cybersecurity measures, encryption protocols, and data protection mechanisms to protect sensitive audit data from unauthorised access, corruption, fraudulent change, release to third parties. In the UAE, where cybersecurity threats are increasingly prevalent, audit firms must highlight and invest in cybersecurity awareness, training or education, and compliance to mitigate risks and safeguard client confidentiality.
Regulatory Compliance & Accountability: Regulatory Audit automation increases challenges with regards to regulatory compliance and accountability, especially with the use of advanced technologies and algorithms in audit processes. Regulators and oversight bodies in the UAE may require audit firms to demonstrate the transparency, reliability or dependability, and authenticity of audit automation tools and methodologies. Auditors must ensure that audit automation complies with mandatory regulations, industry standards, and professional body guidance, and commit to regular audits, hot & cold reviews, and inspections to ensure compliance and integrity.
Ethical Fears & Professional Judgement: Automation poses ethical concerns or questions connected to the reliance on algorithms, AI, and ML algorithms in audit decision-making processes and protocols. Auditors must exercise professional judgment and scepticism when interpreting automated generated results, authenticating audit evidence, and ultimately making audit conclusions. In the UAE, where ethical standards and professional integrity are essential pillars of the audit profession, auditors must ensure that audit automation does not jeopardise their independence, objectivity, or ethical principles or norms.
Client Expectations & Adjustment: Automation will probably challenge clients' expectations and require them to adjust to new audit methodologies, technologies, and reporting structures. Clients will have genuine concerns regarding the consistency, precision, and security of audit automation tools and processes which necessitate further assurances and explanations from auditors at a senior if not engagement partner level. In the UAE, where businesses value clarity, veracity, and trust in their audit engagements, auditors must communicate effectually with clients and tackle their concerns about audit automation to ensure confidence and satisfaction.
Benefits and challenges
In summary, Audit Automation currently presents both opportunities / boon and challenges / nemesis for auditors, clients, and stakeholders in the UAE. While automation offers major benefits in terms of efficiency, accuracy, and value-added services, it also poses risks such as job dislocation, ethical questions, cybersecurity risks, regulatory compliance problems, and client adaptation issues. To fully exploit the benefits of audit automation and mitigate its potential risks, audit firms in the UAE must adopt a balanced strategy incorporates transparency, integrity, professionalism, and a client-centric approach. By utilising automation effectively and responsibly, audit firms can potentially enhance audit quality, deliver value to clients, and above all maintain their competitive advantage in a VUCA world.
Finally, the authors believe that it is matter of when not if all top 10 global firms in the UAE and the Gulf Cooperation Countries become automated, since, in the words of the great business thinker Brian Tracey:
"Automation is not a thing of the future, but a thing of the present."
— Saad Maniar is senior partner at Crowe MAK UAE and Dr Faisal Sheikh is principal lecturer at Nottingham Business School, UK.
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