The use of automated tools for audit such as data analytics has grown dramatically in the last three years, however auditors are dependent on whether companies have a robust IT infrastructure that allows data to be extracted in a usable form to challenge management, according to a new report from the UK’s Financial Reporting Council (FRC).
The report follows up a review conducted in 2017 which highlighted that the use of data analytics for audit was not as prevalent as the market might have expected. However, three years on and the FRC has said there has been a ‘step change’, with data-led audits more prevalent and the use of technology being routine at the largest UK audit firms.
The FRC also found that emerging technologies such as machine learning and predictive analysis, although in their infancy, can help to identify unusual transactions or challenge judgements around going concern or impairment that would not otherwise be found by a human auditor. The FRC encourages the audit firms to continue to develop their technologies in these areas to seek further improvements in audit quality.
Read the full article in the International Accounting Bulletin here