Auditing has been an ever-changing discipline since its inception over 100 years ago. But how much have the challenges facing the profession evolved over the last decades?
The main recurring issue is still the need to keep up with what’s new – like legislative requirements, technological innovations, new business models. Auditors are not only tasked with working out how to incorporate those changes into their own activities but also with considering how they impact their clients or those they do business with.
To these historical problems are then added new ones, those arising especially during the
busy season – like the more significant number of clients to handle at the same time (and more complex client types), multiple projects to take care of, longer work hours to meet tight deadlines. No matter the specific type – public, private, audit, and tax accountants are familiar with that notorious period of the year. The intensity and timing of it can vary, but they all share the increase in workload and, consequently, higher stress levels to cope with clients’ (and their own firms’) pressure.
Meanwhile, digitization is pressing the world ahead.
Organizations from all sectors are going digital, and expect the same from their auditors. It is estimated that by year-end 2020, 65% of enterprises will have re-engineered their document process with a focus on automated creation and routing. While most companies worldwide are making significant investments in technology, where are the auditing firms on the digitization roadmap? Can they also take advantage of new technologies to improve operations and processes?
Is digital transformation an opportunity for auditors just as it is for everybody else?
Auditing has traditionally been a field characterized by a low level of digital innovation. However, as many of their processes are repetitive and labour-intensive by nature, a general realization of the achievable potential from automating these tasks has emerged in the industry in recent years. In this time of political, economic, and technological upheaval, the profession needs to be eager for change.
All workflows, where possible, should exploit digital processes. Embracing the power of technology goes a long way in providing faster and safer operations, improving customer experience, and building overhead trust.
With the necessary technologies and regulatory frameworks in place to support a digitized business environment in finance and accounting, auditors only need to implement the right solutions and systems to start deriving benefits for their work and their clients. Transition times rarely come without challenges, but automation has the potential to advance and future-proof the overall business.
Audit report process inefficiencies – is it time for a change?
Regardless of the type of audit – whether it pertains to financial statements and accounting records or it focuses on the performance and compliance of other departments (like the information management system) – a basic audit process usually includes the following phases:
This workflow is a typical example of a process heavily reliant on documentation that requires many steps and actions both from the auditing firm and the clients. Six main document categories need to be shared, signed and collected in performing an audit process (engagement letter, KYC documentation, letter of representation, management statement, additional documents required for inspection, and the final audit report).
All this paperwork, in turn, implies exchange, scanning/printing, signing, and storing documents – with all the potential compliance issues that can accrue from a security and privacy perspective. Furthermore, to demonstrate the ownership and authenticity of such documents, both parties (auditor and client) will need to be physically present to handwrite their signatures and prove their identity.
Assurance reports are steadily more in demand. Consequently, the workload for auditing firms is continuously increasing. Customer expectations and widespread needs for speed and safety have evolved as well.
Surveys have indeed shown that both auditors and their customers face significant hurdles during the audit process. Delays in providing documents and, more generally, the cost-effectiveness and the time spent gathering evidence are among the most common issues tackled by professionals in carrying out the audit. Clients complain about excessive audit duration and frequent postponements in finalizing financial statements and reports, in availing documents, and responding to audit queries. This is mainly due to the fact that auditors usually have to deal with multiple clients and many assignments piling up on their desks.
Things get more complicated when it comes to ensuring the compliant execution of such a process. Legacy systems are likely underperforming and companies relying rigorously on hard-copy-based flows often have a hard time making sure they abide by relevant legal requirements. That’s why workflow digitization is ever more consistently implemented as an effective means to meet compliance needs. And this is even more true for businesses operating in a highly regulated environment like auditors – whereby the right digital solution can make all the difference!
going digital means in the world of auditing
In its purest form, auditors’ digitization means transitioning accounting and reporting documents from the traditional paper-based system to an electronic format.
Assuming that companies of all sizes that manage more than 3.000 documents annually should consider digitizing their financial functions, auditing professionals should not be seen as an exception, as theirs represents the perfect example of a business that relies heavily on written documentation.
Like other companies from the BFSI sector, auditors typically perform paper-centric workflows, whose automation would result in significant cost reduction and process optimization potential.
For auditors, digital adoption means improved quality and greater transparency, shorter audit cycle times, and reduced errors and disservices. It’s more than a transformation in technology. By accelerating administrative tasks, digital investments help optimize efficiency so that professionals can focus on more strategic areas of their roles and, in turn, add more value to stakeholders.
How can auditors and accountants digitize their business activities?
For successful conversion of paper processes, it is necessary to identify a digital alternative for each of the steps involved: client onboarding and KYC compliance, signatures to be attached or collected, documents to be exchanged and stored. Fortunately, technology has made huge strides for each of these workflows, offering cutting-edge digital versions – with all the advantages that they involve.
1. Avoid piles of IDs for client onboarding
The identity verification phase is particularly suitable for digital conversion and can be greatly streamlined and speeded up while ensuring compliance with AML Regulations. With an automated KYC process, customer due diligence duties can be performed online – removing the need for the physical presence of the person to be identified and without prejudice for security and privacy. Automation capabilities allow to set up the required steps so that the software asks for and receives the sensitive documentation in a highly safe manner, verifies the social security number (or similar data), and securely archives the information received while preserving its confidentiality.
Know-Your-Customer digitization increases the reliability and quality of the data collected and helps avoid duplication and inconsistencies – with all the benefits that follow in terms of greater staff productivity and improved time-cost efficiency.
2. Stop using pen and paper to sign your documents
Signing process digitization brings unprecedented convenience as it enables remote transactions, saves time and money, and demonstrates CSR commitment.
Being trusted and enforceable in nearly every industrialized nation worldwide, digital signatures are as legally binding and valid as ordinary ones placed with ink on paper. It follows that no company, court, or authority can refuse to accept or recognize contractual documents on the grounds that they are digitally signed.
What’s likely the greatest benefit from the automation of the signing process is the higher security provided: the digital signature is the signing method that ensures with most certainty the identity of the signer as well as the integrity of the message. Furthermore, digital signatures are labelled as virtually impossible to defraud. A document signed digitally cannot be altered in transit, and the contractual parties can’t deny having signed it as their certificate-based digital ID binds each signature to the document with encryption.
3. Standardize and secure your document storage
It can be challenging to protect confidential data from information theft when such data is retained on paper records that are highly vulnerable to security breaches. Not to mention how easily paper documents can get misplaced and lost.
Digital transaction management gives the means to faster, easier, and more secure modalities of handling sensitive documents. Having an electronic inventory of your files – always accessible from any device so that you can sign and send on the go – lets you effortlessly navigate your documents and retrieve the one you need in a matter of seconds. This helps prevent everyday pitfalls such as loss of data or files, process breakdown, or lack of control. Document-flows digitization allows the full upgrade of paper-based transactions thanks to time-saving functionalities like archive management, search and retrieval, and progress overview.
Moreover, a comprehensive DTM solution improves information sharing and project collaboration. Greater security is ensured when the data is regularly and automatically backed up to the cloud so that even cybersecurity incidents can’t affect documents and information safely stored offsite-online.
4. Embrace the “set it and forget it” mindset
Let technology lighten your workload and simplify your daily tasks. Business process automation goes a long way in easing and relieving repetitive manual routines and appears highly beneficial in improving document routing and oversight. By setting up user-defined rules and actions, you can build a conditional workflow that triggers the necessary steps for your documents. This accelerates how tasks get done by routing information to the right person at the right time. Smoother processes and automatic reminders confer the priceless comfort of keeping track of the projects’ progress status. By scheduling a due date for the documents to be sent out or giving participants a notification, you’ll never miss a deadline.
Automation can unburden approvals and filing of reports and transform these otherwise long and slow flows into just a few clear and easy steps – reducing processing time from weeks or days to just a few hours. In the meantime, the focus can be allocated to more value-adding activities requiring professional judgment, analysis, and insight, such as consultancy and advisory services.
The audit process: time for change
Audit firms play a vital role in the functioning of capital markets. By promoting integrity in reporting and building a foundation of trust, auditors reduce financing costs and contribute to an efficient allocation of capital to fuel economic growth.
There’s no need to look further into the future to understand that paper-form processes will not live up to modern needs. It’s enough to look at today’s reality. Digitization is no longer a nice-to-have; it’s a must – and this doesn’t just apply to large audit firms.
As we approach the end of 2020, it’s a critical time to reflect on the challenges facing the accounting world and identify opportunities for improved audit quality and client service. Especially since policymakers and regulators initiated an open promotion of digital solutions to standardize processes internationally and improve transparency, security, and compliance. Among other things, going digital is seen as an effective way to reshape the business sustainability profile and demonstrate climate-friendliness and social responsibility. Those core factors are the main drivers for auditing automation and are pushing firms worldwide to implement new technologies and develop their business models.
With the Big Four leading the way towards digital adoption, audit firms worldwide have indicated that they are currently making prominent investments to investigate ways to redesign their audits and take advantage of emerging innovations. Smaller firms are inspired to follow, which ultimately sets new standards for the use of digital solutions and the proliferation of technology-driven organizations.
Among the different options available on the market, it’s crucial to choose the right one that best suits your exigencies. Taking steps towards digitization is just the start point: to achieve actual process optimization, business operations must be streamlined and automated, while always keeping in mind security requirements and compliance needs.
How can Penneo help you digitize audit and accounting processes?
At Penneo, we’ve worked closely with audit and accounting companies to build a seamless solution that answers all your demands. We strive to continuously improve our customer-focused product and build new integrations to offer an ever-better experience and further simplify your work!
The overarching combination of capabilities Penneo offers will suit your business needs, improve known problematic areas and operations, and bring further unexpected benefits.
Recent events forced us to stay away from the office. Still, they have also given us the chance to fully appreciate the flexibility of digital experiences, accessible from anywhere, at any time. By using Penneo, wherever you are, everything is under control.
We conceived our product by putting ourselves in the customers’ shoes and built an easy-to-use file structure to facilitate day-to-day operations. It only takes a few moments to get started!
Having an overview of the progress status of your tasks lets you be always on top of everything. You can effortlessly navigate your documents, retrieve the one you need in a matter of seconds, and never miss a deadline.
Overly long audit cycles can erode the stakeholders’ satisfaction. Penneo significantly speeds up the development of the final report, lets you complete more audits in a shorter amount of time, and focus efforts on other tasks.
Penneo automatically prevents the adverse side effects of manual processes and enhances control capability and process analysis; all this allows for higher accuracy and preserves the cost-effectiveness of the entire flow.
Thanks to highly secure sharing capabilities, users get to distribute files to colleagues and clients safely. Penneo lets you create and arrange teams, assign roles and privileges, ease task delegation, and streamline communication. You’ll be saving heaps of time while fostering higher employee satisfaction.
Most companies are likely using one or more software for their activities, and compatibility doubts may arise in adopting new solutions. However, to use our system, there’s no need to change your previous habits and programs: you can integrate them with Penneo, and make them better.
With API integrations you can eliminate redundant data input and allow seamless information flows between different platforms; Penneo provides accountants with a smooth process – from onboarding the client to filing the annual report with the authorities.
We implemented top-level measures to protect the information entrusted by our users. Data and documents can be encrypted to secure content integrity and prevent alteration, and they are stored in data centers within the European Union.
Offering a digital-only flow enables a good adoption rate and safeguards client relationships. Giving them a hitch-free, internet-only service on a flexible platform like Penneo will improve customer experience and increase your business’s competitiveness.
Paperwork reduction means lower materials consumption, less space dedicated to physical archives, and more efficient resource allocation. This not only saves costs but also represents a huge step towards sustainable business practices that create value through digitalization.
Anything that helps shift away from printed documents is good news for the environment. Going green leads to better CSR performance to let you achieve your sustainability goals.
Putting it all together, digital adoption means improved quality and greater transparency, shorter audit cycle times, and reduced errors and disservices. Like other companies from the BFSI sector, auditing workflow automation results in significant cost reduction and process optimization potential. In the long run, it’s more than a transformation in technology. It’s a step forward business-wise.