Providing credible financial statements and accurate reporting that investors and shareholders can rely upon requires auditors that are independent, accountable, and capable of producing quality work. Financial stability depends on these high-quality audits and the auditors producing them.
In an environment with high risk and volatility, a quality audit becomes even more essential. Given its importance in society, how can auditors, audit committees, and audit firms or practices find ways to improve audit quality?
Here are three best practices to get you started:
1. Use Full Data
For the longest time, auditors relied on sample data sets to perform analysis. Reviewing every line of data for a large corporation wasn’t a feasible task.
While running statistical samples was the norm for most of audit’s history, now auditors can run advanced analytics and queries using big data and AI.
Technology has made it incredibly secure and easy to extract full financials in minutes. Machine learning and processing of big data means the quality of those extracted financials is far greater. This combination can greatly reduce or even eliminate the need for things like assumed error rates and opens the potential to uncover anomalies that the human brain alone would have never been able to find.
With the power of machine learning and AI, the massive financial datasets from businesses of all sizes can be combed through by smart technology to uncover risky transactions or red flags that would have been nearly impossible to catch manually. Even small firms can take on larger business audit clients without the fear that there isn’t enough manpower to review the available data.
The result of using all the financial data rather than a statistical sample is a higher-quality and more efficient audit of financial statements where auditing professionals can instead spend their time investigating anomalies and where clients can get actionable insights faster.
2. Focus on Your People
Audit quality is highly dependent on people and their skills, experience, and capacity. This is especially true in small to medium-sized firms looking to take on more, including larger companies that have largely been monopolized by The Big 4. Unfortunately, according to the CPA journal, finding and retaining talent remains a top issue reported by firms. It was reported at the Synergy 2022 conference that there’s been a 36% drop in Bachelor’s and Master’s Degrees in accounting.
Even with the talent pipeline lacking the desirable breadth, there are still things audit practices can do to increase capacity in their current team while attracting new recruits.
Investing in their people is one way to prevent burnout. Flexible work schedules, expansive benefits, and growth opportunities can all help to alleviate stressors in your team’s lives. However, one key way firms can retain their top talent is to allow them to do more meaningful work. According to recent studies, monotonous work can lead to mental health issues and burnout among workers. Furthermore, professionals claim boredom is the number one reason they look for new jobs.
Reducing the mundane, repetitive tasks that can create workplace boredom is a great way to keep your team engaged, happy, and focused on high-value work. This not only frees up their time for a greater project capacity but also creates a more meaningful connection between your team and their work.
3. Invest in Technology
Accounting and auditing technology has exploded in recent years, increasingly enabling auditors to improve the quality of their work. Firms that invest in the right technology gain several advantages.
As KPMG Canada observed, “the future of audit isn’t just about remote audits; it’s about transforming underlying processes using technology to achieve three objectives: a higher quality audit, a more efficient audit and better business insights for our clients through the traditional audit process.”
Your team’s experience and skills get amplified when they can be combined with powerful technology. Without technology, Tony Stark isn’t Iron Man. With accounting technology, your team becomes audit superheroes, bringing their top-level brains to advanced computing.
Additionally, firms with a strong tech focus attract high-performing employees and new hires, with some firms claiming their tech stack gives them a competitive edge when recruiting (see this white paper from Wolters Kluwer).
Lastly, technology can help improve audit efficiency. If your team can work smarter and eliminate bottlenecks, then their capacity for additional deals goes up. Audit quality won’t suffer with the increased number of projects because auditors can stay razor-focused on analysis instead of logistics.
Strongbox Will Help You Get There
Fortunately for audit practices, there’s one tool in particular that can help firms implement all three of these best practices: Strongbox.
Strongbox securely connects directly to your client’s accounting system or ERP and extracts all available financial information in seconds. With a few clicks, auditors get access to everything from transaction details to monthly account balances, complete with flat data tables and data visualizations.
With the data already extracted and normalized, auditors can get started on analysis right away instead of spending time hunting down the right reports and manually manipulating the information in Excel.
Over 50 validation checks are run on each month’s worth of data that include continuity, missing figures, activity, or correlations, trial balance validation, and even Benford’s Law. Your team can apply their experience and knowledge to a complete, validated financial dataset and deliver high-quality insights to your clients in a fraction of the time.
Strongbox works with the most-used accounting systems and ERPS, including QuickBooks (Desktop and Online), Sage Intacct, and NetSuite, and maintains high security standards, including SOC 2 Type II Certification.
Contact us today to see how Strongbox can supercharge your audit practice.