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Technology has a very wide ranging impact on our everyday activities as well as our work environment. For this reason, an increasing number of professional accountancy organizations (PAOs), as well as IFAC and the Small and Medium Practices (SMP) Committee, are determined to help professional accountants adapt to the challenges technological change brings to continue serving their clients and the public interest.

Technology affects the auditor’s work environment, both on the methodology applied in performing an audit as well as our relationships with clients and employees. Today, the firm’s visibility in the marketplace, our own internal management processes, internal and external communication, and many other aspects of our professional activities depend and even thrive on technology.

Specifically, information technologies is increasingly core to recording financial transactions of our clients. On one hand, confidence in the financial statements depends on the ability of the information technology systems to ensure the completeness and accuracy of the data being captured. On another hand, internal control in any medium-sized or large organization involves reliance on their information as well as communication systems operating under a proper technological framework. After all, the strength of established controls are essential for auditors to be able to rely on the underlying economic and financial data obtained through an information technology system.

For example, thanks to the development of cloud applications, which allow access from any location, updating accounting data can now be performed instantly and remotely. Once again, a detailed analysis of the strength and weaknesses of such systems, procedures, and communications security is essential for our work as an auditor when it comes to the issue of data integrity.

Currently, information systems have enabled us to access a huge amount of data like never before. Using data analytics helps us detect abnormalities (both in time and volume) that may then allow us to drill down on “exceptional” transactions requiring more detailed analysis. This includes, for example, exceptional transactions such as repeated payments to the same client or for the same product, adjustments or exceptional accrual at certain specific dates, etc. All this allows us to focus our audit efforts on the potential risks of irregular transactions not being detected during the audit process.

When our work is based on the analysis of significant risks (and exceptional reporting) and on the reliance in the internal control systems of our client, does annual audit as we conceive it today continue to make sense? Certainly, our role as auditors is still relevant, as we are the independent experts who can verify the appropriate presentation involving complex financial transactions (based on some applied criteria or reporting framework) and conclude that it is being presented in a true and fair manner. But probably, society and the client will appreciate a more continuous information flow than just our audit opinion delivered once a year.

Certainly, we must analyze and continue to emphasize, from the perspective of our code of ethics and independence, the main risks of the company we are auditing, how it is responding to them, and our opinion with regard to the appropriateness of these responses. However, it makes far less sense for our opinion to be expressed in a single annual report that merely reflects historical situations a few months after the fiscal-year end when we are talking about the real value of an audit to our clients.

Market operators require periodic information that is more dynamic and, in many ways, more focused, including financial and non-financial information. If we can have access to data in real time, and the internal control systems are functioning reliably, we only have to evaluate whether the criteria applied to certain abnormal transaction or some new situations (that the current system may not be able to adequately deal with) are the appropriate ones pursuant to the applicable financial reporting framework. This is where the power of exceptional reporting can be most beneficial. The quarterly information required by stock markets is a sign of the trend of what market might appreciates—short, brief, and very focused.

And what can we say about our work environment? Values of our society, and especially those of the younger people, are changing. The long hours and characteristic of auditing is hardly appealing to the new generations. This certainly make our profession less attractive, although our profession is sometimes treated as a training ground for other careers as there is still unquestionable value in the experience obtained in an auditing firm. But, beyond this, we start to lose talent. If we don't adapt our procedures and change our work environment, we are running a serious risk of losing the greatest talent among the younger generation.

Furthermore, if we do not have a team that is better trained and better prepared than our clients, we will not be able to add much value for clients. Technology can help us in this sense. A continuous analysis regarding clients’ operations, tracking the myriad risks any company faces using and responding to technology, and the completeness and accuracy of transactions being captured and reported make it possible to distribute work more homogeneously with technology over time.

In addition, technology obviously also allows us to work remotely and our staff are able to access clients’ systems from anywhere. This also is a better fit to the younger generations’ values.

There is no doubt that a technologically advanced auditing firm will be more attractive to young talent than another with a more traditional approach, which can be seen as obsolete and irrelevant. The newer generations are digital natives and easily recognize a forward-looking firm that fits in with their professional aspirations.

Being prepared for changes is essential in order to continue responding to the general interest of our profession. And this has to do with a forward thinking management within our practice. Of course, mere technological adaptation is not sufficient. We can ask for advice from PAOs and other experts but we will need to change how our firms face the future in the technological age.

Many organizations, including IFAC, are sensitive to the need to support members facing these technological issues. The IFAC SMP Committee is finalizing a new edition of the Guide to Practice Management for SMPs, which will include a new chapter devoted to technology and its possible impact. The challenges and opportunities that technology offers SMPs can be extraordinary, and the Guide shares reflections and advice for the efficient use of technology from the perspective of a forward-looking SMP. We encourage you to take note of this forthcoming publication, which will be available on the IFAC website.