Keeping Up with RPA and the Audit Function

By DR. SEAN STEIN SMITH, CPA LEHMAN COLLEGE

Automation is discussed so often in the context of accounting and audit services that it’s become something of a cliché. But dismissing the trend as just another buzzword misses the bigger picture.

The accounting profession is being redefined and changed on a daily basis by the continued integration of technology and automation tools, both on the client side and within firms. That said, it can be difficult for organizations to keep pace with the rapid development of automation, and this has only increased in the face of the coronavirus pandemic. Much has been written about how the trends toward remote working and a distributed workforce have been pulled forward because of social distancing and other safety measures. The real question, then, is how can firms outside of the top 25 keep pace, stay informed and continue to offer much-needed guidance and advice to clients?

DEFINING THE TOOL

Automation is an umbrella term and can encompass an array of options. A priority in every automation conversation is to make sure that both the client and firm staff on the engagement are on the same page as to what specific automation tool is being used. The major categories of automation include the following: y Bots, and for conversation this will take the form of software bots versus physical robots, are programs that can address some processes that already exist in an organization. Common points for early adoption include implementing bots to manage customer service responses, emails and meeting scheduling. y Robotic process automation (RPA) can be best thought of as a halfway y point between current automation protocols embedded into existing software and more advanced automation packages and suites. Numerous organizations, in the rush to automate processes and accelerate innovation, may overlook cost-effective RPA solutions in the marketplace. Artificial intelligence (AI) may be where every organization wants to go, and that is because — in theory — an AI tool can learn, apply and expand upon existing information and training to interpret new information to help business owners make more-informed business choices. Popularized by IBM Watson, the reality is that, for many organizations, an AI implementation is further off than some might think.

From a practical perspective, this means that a critical part of audit and assurance in an increasingly technological environment will focus not only on the tools themselves, but also how these tools interact with underlying business goals and processes. In other words, if an automation project is underway or being considered, the very first step should be an assessment of existing tools, processes and controls. Without understanding where the organization currently stands, and whether the controls and documentation are being followed, it is difficult to make an informed and cost-appropriate decision.

DEVELOP THE USE CASE

The use case or application for an automation tool needs to be assessed, and this is where small and midsize firms and associated advisors need to focus clearly. While a fully blown AI suite and implementation may be the end goal that upper management at both the client organization and the firm would like to reach, the reality is that many companies simply are not ready for such an implementation. Media presentations of what AI is capable of may have led some practitioners and business leaders to assume progress is more advanced or widespread than it actually is. This is both a challenge and an opportunity for auditors and other members of the profession to educate clients.

AUDIT IMPACT

Automation, in and of itself, will not address or solve underlying business problems or conditions, and this applies equally to emerging technologies as it does to more traditional technology applications. Increasingly automating processes, which can include everything from onboarding to tax preparation to financial reporting, can inadvertently lead to the breaking down of internal controls and processes. Specifically, if a process is reduced from 15 steps and three employees involved to six steps with only one employee involved, this might very well result in internal controls and separation of duties no longer functioning. From a practical perspective, the continued automation and digitization of the accounting function will ultimately change the audit in a fundamental manner. Automation can deliver fantastic benefits in terms of efficiency, but it must be implemented in a correct and logical manner to deliver on these potential benefits. There are several considerations that need to be taken into account as audits and assurance services continue to become integrated with technology services: y Audit and other attestation engagements will invariably shift from confirming specific amounts to examining certain processes. With increased automation comes increased importance for systems testing and process testing;

SOC 1 and SOC 2 engagements are prime areas for further development and expansion. y Continuous audits will continue to move from the conceptual stage to market reality due to the augmentation of reporting and attestation processes.

Automation — via whichever tool makes the most sense from a budget and business perspective — will allow business managers and attestation professionals to examine information on an ongoing basis. y Skills and competencies that are necessary for an effective and efficient audit to take place will continue to change.

Some tasks, including confirmations and inventory counts for example, will become less important as automated systems and reports handle the majority of such work. That said, these processes will still need to be reviewed, and attestation professionals will need to possess the skills to interpret results in terms of business objectives.

Emerging technologies and their effects on businesses and the accounting field are nearly impossible to accurately forecast. One thing, however, is certain: tools must first be carefully assessed before being purchased and implemented. That, at the end of the day, may be the best value-added service practitioners can deliver: advising clients through the planning, implementation and maintenance of emerging technology tools.

Dr. Sean Stein Smith, CPA, DBA, M.S., MBA, CMA, CGMA, is an assistant professor at Lehman College. He is the chairperson of the NJCPA Emerging Technologies Interest Group and is a member of the Content Advisory Board, Student Programs & Scholarship Committee, Emerging Leaders Council and the Nonprofit and Accounting & Auditing Standards interest groups. He can be reached at drseansteinsmith@gmail.com.