International Standard on Quality Management (ISQM) 1, Quality Management for Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related Services Engagements
Today, the International Auditing and Assurance Standards Board (IAASB) opened the public consultation for a group audit-specific section of the proposed auditing standard for less complex entities (LCEs). The proposed section, Part 10, Audits of Group Financial Statements,is intended to form part of the proposed International Standard on Auditing for Audits of Financial Statements of Less Complex Entities (ISA for LCE) when finalized. The exposure draft is open for public comment until May 2, 2023.
Group audits were not included in the scope of the original Exposure Draft of the ISA for LCE. Given stakeholder feedback, the IAASB reconsidered its decision to exclude group audits and developed proposals that address audits of less complex groups.
With the inclusion of group audits, the IAASB has proposed changes to the Authority of the proposed ISA for LCE. For example, the IAASB removed the prohibition on using the standard when the audit is a group audit unless component auditors are involved, other than in limited circumstances in which a physical presence is needed for a specific audit procedure for the group audit (e.g., for attending a physical inventory count or inspecting physical assets).
The IAASB invites all stakeholder to comment on the exposure draft via the IAASB website. Comments are requested by May 2, 2023.
The International Auditing and Assurance Standards Board (IAASB) today issued a public consultation for its 2024-2027 proposed strategy and work plan. The strategy seeks to accelerate the actions originally laid out in the 2020-2023 strategy with a focus on standard setting that supports the performance of high-quality audit and assurance engagements.
“Audit and assurance play vital roles in the world’s economies. At their best, audit and assurance practitioners enhance trust in markets and assist in efficient, sustainable resource allocation,” noted IAASB Chair Tom Seidenstein. “Our proposed new strategy strives to develop the globally accepted standards for audit, assurance and related services that enable high-quality engagements, with a distinct focus on both the core need for audits of financial statements and the growing demand for sustainability assurance engagements.”
The proposed strategy outlines four strategic objectives:
Support the consistent performance of quality audit engagements by enhancing our auditing standards in areas where there is the greatest public interest need;
Establish globally accepted standard(s) for assurance on sustainability reporting;
Strengthen coordination with the International Ethics Standards Board for Accountants and other leading standard setters and regulators to leverage better collective actions in the public interest; and
Create more agile, innovative ways of working in line with the Monitoring Group’s reform vision.
The IAASB’s 2024-2027 work plan describes the technical standard-setting work required to support the strategy. The work plan focuses on where further standards’ development can best contribute to meeting the needs of stakeholders in the external reporting ecosystem, while balancing timeliness with quality.
The IAASB invites all stakeholders to comment on the proposed strategy and work plan via the IAASB website by April 11, 2023. Stakeholders can respond to all questions in the Consultation Paper or focus on those questions that are most relevant to them and where they have specific comments.
This proposed strategy seeks to accelerate the actions originally laid out in the 2020-2023 strategy with a focus on standard setting that supports the performance of high-quality audit and assurance engagements.
Welcome to the sixth Market Scan from the IAASB's Disruptive Technology team. Building on our ongoing work, we issue a Market Scan every 2-3 months. Market Scans cover exciting trends, including new developments, corporate and start-up innovation, noteworthy investments and what it all might mean for the IAASB.
In this Market Scan, we explore Robotic Process Automation, a technology used for executing repetitive tasks that has applications across the audit process, from data transformation to workpaper creation, as well as potential for forming part of an audited entity’s IT environment.
Technology Landscape, September 2022
We cover:
What is Robotic Process Automation and why is it important?
The latest developments
What this might mean for the IAASB
What is Robotic Process Automation and why is it important?
Robotic Process Automation (RPA) is a technology that involves creating software robots or “bots” to perform repetitive, routine manual tasks, such as extracting data, filling out forms or moving files. By completing rules-based actions that emulate human processes, RPA tools can autonomously complete various activities across multiple unrelated software systems.
What is RPA (Robotic Process Automation)? Two-minute watch, Eye on Tech
What is RPA (Robotic Process Automation)? Two-minute min watch, Eye on Tech
RPA has evolved in recent years with companies such as Automation Anywhere, Blue Prism and UiPath developing ever more sophisticated technologies to automate tasks, workflows and processes. Coupling RPA with artificial intelligence technologies, such as machine learning, has enabled businesses to automate more complex tasks that may involve more judgment or use of unstructured data. This combination of technologies is often referred to as Intelligent Automation or Cognitive Automation.
RPA within the audit process
There are several areas across the audit where RPA can be deployed to drive efficiency in the audit process as well as improve audit quality by enabling consistency of outputs.
Data preparation – combining data sets (e.g., general ledger transactions and trial balance information) and carrying out transformation actions to prepare data for use in automated tools.
Transaction matching and reconciliation – automating the process of matching transactions to external datasets (e.g., bank statements)
Basic documentation – completion of basic standardized documentation, such as workpapers, checklists or templates based on prescribed inputs (e.g., trial balance information or information documented elsewhere in the audit file)
RPA within audited entities
Audited entities may use RPA to support certain business processes or repetitive task activities, such updating records, processing transactions or completing reconciliations.
Benefits of Robotic Process Automation, Digital Beanie
Recent Noteworthy Developments in Robotic Process Automation
These recent developments that may signal future disruption in this area. It is not a complete list of all activities in the field of RPA. For a reminder of Key Venture Capital and Investment terms please refer to the first Market Scan.
1. RPA market experiences slowing growth
The RPA market is dominated by some key players, with the 10 largest RPA vendors accounting for over 75% of the market. There have been some indications in the RPA market that growth in this technology sector may have begun to slow, although double digit growth is still predicted for 2023. UiPath, one of the leading companies in RPA software, has seen its stock value continue to fall since its IPO in 2021. Whilst Automation Anywhere, another well-known RPA provider, sought to secure a $200 million loan and Blue Prism, another large player, agreed to a $1.5 billion takeover offer from Vista Equity Partners in September 2022.
2. Startups with Low-Code and No-Code RPA Solutions
Whilst the traditional RPA industry may be slowing down, business process automation— a term used to describe the use of technologies, including RPA and AI, to streamline and automate more complex business processes—has seen continued growth, particularly with low-code or no-code solutions that can be deployed by those without coding skills.
In May 2022, UiPath announced a new partnership with airSlate, a workflow automation company, to advance the development of workflow solutions to enable individuals and small businesses to digitally transform their organizations.
In June 2022, Next Matter, a workflow automation platform for business operations, raised $16 million in a Series A funding round to expand its team and operations.
In November 2022, Rewst a no-code RPA provider for managed service providers, raised $21.5 million in Series A funding to continue to build out its Robotic Operations Center.
What this might mean for the IAASB
The IAASB is interested in maintaining its collective knowledgebase on digital technologies (including on specific sub-topics such as robotic process automation), promoting digital readiness and enablement through its engagement with stakeholders, and encouraging action by others to supplement and support the IAASB’s standard-setting activities.
The IAASB is also keen to explore how technologies could be used to enhance interaction with auditing standards. Subject to the IAASB’s work plan decisions, possible use cases of digital technologies for audited entities and audit engagements might provide input to further modernize the IAASB’s standards to be adaptable to and reflect the current business and audit environment (while recognizing that the standards would address digital technologies in a principles-based manner).
The increasing accessibility of RPA through the growth of low code and no code technologies offers opportunities for those without extensive programming knowledge to develop solutions to address specific pain points or low value time-consuming activities in their everyday work, including for audit practitioners or audited entities.
Where RPA or other robotics-based technologies are deployed by auditors to complete audit procedures, adequate governance and approval of these technologies needs to be in place to ensure they are designed effectively, fit for purpose and used appropriately, including provision of training or enablement where needed. Availability of no-code or low code technologies may give rise to wider use of small-scale RPA to address specific needs which has the potential to improve audit efficiency but if ungoverned, could impact audit quality.
The use of RPA in audited entities to automate actions previously performed by a person may change how a process and its related controls operate, and therefore the risks within the process and the appropriate audit response, which may include understanding how the use of RPA is being governed and controlled. As the use of this technology develops further, particularly when coupled with artificial intelligence technologies, this may present new challenges for the auditor and may, therefore, have implications for the IAASB’s work, whether in terms of future standard setting related to technology or facilitating or supporting action by others (e.g., developing guidance).
KFC, the popular fast-food chain, experienced a public relations disaster when its automated communications process messaged customers in Germany about a promotion to “commemorate Kristallnacht”. Kristallnacht was a series of Nazi pogroms that took place against German Jews in 1938. The company blamed an error in the automated process which linked calendar events to promotional content.
