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Gearing up for the digital era
AS technology becomes increasingly woven into the fabric of accountancy over the next decade, the profession will need to harness tools such as cloud computing and data analytics to reinforce its emerging role as trusted business adviser.
This is especially important as investors today demand greater transparency and reliable financial information. In such an environment, accountants can leverage technology to ensure that the information communicated to investors present a true picture of the financial health of the company.
Says Lee Sze Yeng, head of quality at KPMG in Singapore: "To serve our clients better, we are embracing new technologies and innovative approaches more quickly than ever before, incorporating these into our business and our auditing processes, and proactively assisting our clients in their adoption.
"It is thus our belief that the accounting profession needs to keep up with technological advances if we are to empower change, and inspire confidence in a future increasingly marked by rapid change. This means that audit processes need rethinking."
To achieve this, accountants must first gain a deep understanding of the client's operating model, data flows and structures and make arrangements to access the data.
The profession must also invest in talent from different fields, such as technology and data science to complement its core training of accounting and auditing. Tapping the capabilities of the young and their IT capabilities can also help in this change journey, adds Ms Lee.
Lee Fook Chiew, chief executive officer, Institute of Singapore Chartered Accountants (ISCA), believes that the profession must think beyond mere adoption of tools and productivity improvements to fully harness the power of technology.
"The infrastructure and tools must be supported by a culture of openness, collaboration and innovation - hallmarks of the digital economy. On the flip side, the profession must also recognise the growing risks that are part of going digital, and develop strategies to counter emerging issues in cyber security, data protection and privacy," he says.
He adds: "While it is not possible to predict the future, accountants can keep themselves updated on emerging technologies and digital trends and focus on leveraging technology to create and capture greater value."
On a macro level, there is a need to foster a vibrant ecosystem to support technology adoption within the sector. To that end, ISCA works closely with government agencies on initiatives to encourage adoption of technology. One example is a move to encourage firms to use cloud computing to increase mobility and efficiency of work processes.
New digital tools are also being used to take over routine tasks such as compliance and management reporting, freeing up experienced accountants to focus on areas involving professional judgement and investigation.
Kenneth Yap, chief executive of the Accounting and Corporate Regulatory Authority (Acra), says: "Routine and non-judgemental processes can be automated to reduce manual work and free up auditors to focus on higher value work and significant audit matters that require their professional judgement and scepticism."
He notes that audit firms can strengthen their internal controls through embedding automated checks into audit software and having different audit teams perform customised templates to ensure audit procedures are consistent.
The convergence of social, cloud, mobile and big data technologies presents many new opportunities and challenges for the auditing profession. The potential for auditors to now collect and analyse the data in greater depth and breadth is enormous, industry players say.
Among the new technologies being embraced by the profession, the use of data analytics in particular is helping to improve the quality of audits. With the help of analytics tools, real-time observations and insights can be quickly generated from extremely large and complex data sets, allowing accountants to make more informed business decisions.
For example, predictive data analytics will allow auditors to better estimate a company's expected quantum of sales based on market information, rather than relying mainly on the client's explanations. The digital tool can also help auditors to sieve out abnormal journal entries to be followed up during the testing of journal entries, making the test more effective.
Meanwhile, the use of computer-assisted audit tools is being used to analyse missing sequences or duplicate transactions within a large and complex transaction pool. This helps to improve the detection of fraud and anomalies between transactions, especially in larger businesses such as multinational corporations.
"As fraudulent practices are getting more and more difficult to detect, such technologies are a welcome addition for the profession," says Mr Lee.
However, the profession must be aware of the growing risks associated with new digital technologies, even as it moves to adopt them. For instance, the increased ease of accessibility and dissemination of information requires accountants to adjust their internal procedures and policies in order to safeguard client confidentiality.
For small and medium-sized audit practitioners, the high cost of employing such technology is another obstacle, but this can be managed by tapping on government schemes such as the SME Productivity and Infocomm Adoption and Transformation (iSPRINT) and the Productivity and Innovation Credit (PIC) scheme.
Despite these challenges, the technology-fuelled transformation of the profession is irreversible.
"The accounting profession has to reinvent itself in the digital economy. If we insist on sticking to the old ways, we are shortchanging ourselves and the public who has entrusted us with safeguarding the integrity of financial reporting," says Ms Lee.
What cannot be compromised, however, is the public trust that accountants and auditors must retain in their role as guardians.
Says Mr Yap: They must keep their public interest role at the heart of their practice and continue to uphold audit quality. A fast road should never be a short cut. We should never lose sight of the need for a robust financial reporting ecosystem, especially as business models transcend borders and grow in complexity."