Transition to digital space - Impact on Auditing and Taxation

Jyoti JaiswalJyoti Jaiswal    05 April 2021
Transition to digital space - Impact on Auditing and Taxation

The impact of technology is so pervasive in all sphere of our lives and we may like it we may hate it, we may even dread it, but we just can’t miss it.

Innovative technologies and ideas have brought in a fee of convenience, for the common be it transportation like Uber, shopping like Flipkart ,entertainment like Netflix and holding meeting like Zoom. The dynamics of each particular space have fundamentally changed, which such frequent changes in technology comes the threat of redundancy of both people as well as jobs. As per OECD PIAAC Data 30% of jobs at potential risk of automation by mid 2030s and $15tn Potential boost to global GDP from AI by 2030.

 

Due to the paradigm shift towards a digital society where the usage of IT is continuously increasing, it is important to realize how the audit and taxation is affected by digitalization. So transition to digital space would lead to a great change in business model and provide new revenue and value-producing opportunities and have clear advantages in accessibility, security and scalability; it is the process of moving to a digital space.

Impact on Auditing

Exponential technology and other innovations have begun to transform the traditional audit delivery model. Impacting who, where, and how the audit is done. Through significant improvements and advancements, information technology is quickly and profoundly transforming the auditing industry and profession. Finance teams need to understand that the world will continue to move even faster. We need to prepare ourselves to meet the demands of a business we haven’t even seen yet. So do the Auditors.

Here are some ways of how technology is transforming the auditing industry:

1.  Data Analytics

For auditors, the main driver of using data analytics is to improve audit quality. It allows auditors to more effectively audit the large amounts of data held and processed in IT systems in larger clients. Auditors can extract and manipulate client data and analyse it. By doing so they can better understand the client’s information and better identify the risks. Data analytics tools have the power to turn all the data into pre-structured forms/presentations that are understandable to both auditors and clients and even to generate audit programmes tailored to client-specific risks or to provide data directly into computerised audit procedures thus allowing the auditor to more efficiently arrive at the result. For example NRV testing – comparing the last time an inventory item was purchased with the last time it was sold and at what price.

2.  Artificial Intelligence (AI)

It is the ability of a computer program or a machine to think and learn. They work on their own without being encoded with commands.
 
Now with regard to audit if we talk, earlier audit fees were based on hours but now we use a tool that runs through thousands of contracts and by-single click we get the quantum of data and though the work is done more efficiently within minutes.Then the question arises will the fees would drop down dramatically? So the answer is yes. Therefore in order to save auditors from such a disruptive Trends Impacting auditing would require integrating with AI.

Artificial intelligence, cognitive services, and robotics are helping to automate complex and repetitive tasks and processes. This type of emerging technology supports the transitional role of today's auditor from process-centered practitioner to a critical strategic partner. AI will not replace auditors, but auditors using AI will replace those not using it.

3.  Cloud

Cloud-based computing, such as Amazon Web Services, (AWS), Google Cloud and Microsoft Azure are a type of Internet-based computing that provides shared processing resources and data to computer devices on demand. This enables auditors to perform auditing and testing tasks from any location as well as the ability to deliver working papers, information and reports through the cloud. Cloud-based computing opens up a new way for auditors to work with their clients. Consequently, auditors can spend more time engaging with clients on key business issues rather than mundane processes.

4. Audit Software

Auditors are able to retrieve the necessary information in a timely, efficient manner, and it allows them to organize and present it however and whenever they see fit. Your data quality will improve, and positively affect your overall performance. Audit software applications include audit analytics, continuous monitoring, fraud detection, and workgroup collaboration. BI applications include connecting desktops to mainframes for accessing legacy data, data migration and querying, and data analysis.

In practice the most preferred software is Form.com. KPMG utilizes audit for auditing and PwC utilizes Aura. These are both audit documentation software. Both businesses and auditors are embracing new audit software technology to help avoid costly mistakes and prevent issues with stakeholders.

So it is the high time that auditors need to move in parallel with technology so as to exist in the market because Exponential Organizations have stated that, in the last two years we have seen nine times more data created than in the entire history of humanity.

5. SAP Audit Management

SAP stands for System Applications and Products in Data Processing and SAP Audit Management can enable the auditors in auditing. It is, fully mobile solution, with audit management software improving quality and automating internal auditing procedures. This in-memory audit software makes it quick and easy to document evidence, organize working papers, and create audit reports.

6. Blockchain

It can be described as a data structure that holds transactional records and while ensuring security, transparency, and decentralization.

While traditional audit and assurance services will remain essential, blockchain business applications and new accounting technology are likely to have a significant impact on the way auditors execute engagements. With more companies exploring blockchain business opportunities - including the blockchain audit trail - many accounting firms have undertaken blockchain initiatives to further understand the implications of this important and versatile technology.

To read the full article, find the enclosed file

Disclaimer: Content posted is for informational & knowledge sharing purposes only, and is not intended to be a substitute for professional advice related to tax, finance or accounting. The view/interpretation of the publisher is based on the available Law, guidelines and information. Each reader should take due professional care before you act after reading the contents of that article/post. No warranty whatsoever is made that any of the articles are accurate and is not intended to provide, and should not be relied on for tax or accounting advice.

You can access Law including Guidelines, Cabinet & FTA Decisions, Public Clarifications, Forms, Business Bulletins for all taxes (Vat, Excise, Customs, Corporate Tax, Transfer Pricing) for all GCC Countries in the Law Section of GCC FinTax

Click here to download the file Download


Other articles by Jyoti Jaiswal


like  1 Like
views 694


More From Articles