The SMSF audit world is changing. It used to be a cottage industry and today it is being industrialised. The power of advanced data analytics is transforming SMSF auditing, with today’s clever technology platforms and data analytics combining to deliver smarter, faster, cost-effective audits at greater scale.
Rather than manually analysing and collating multiple disconnected spreadsheets or paper records SMSF auditors have been able to utilise electronic data feeds and smart underpinning databases to automatically and efficiently perform many aspects of the financial statement audit.
Electronic data feeds provide a mechanism to receive and collate structured updated data from various sources so alleviating the need for manual consolidation. To make this automation possible, the major software providers and other external providers such as banks, platform providers, brokers and registries are shifting to cloud-based solutions to provide ease of information access and analysis.
However, increased electronic information also increases the extent of testing to be performed by the auditor around controls and systems. Where data feeds are not received directly by the auditor it is vital that the auditor conducts procedures to determine the completeness, accuracy and reliability of the data feeds.
Lifting the game through the cloud
Auditors are now able to use advanced data analytics as part of the financial statement audit to highlight exceptions, unusual transactions and cover a greater number of samples – even 100 per cent. This allows the auditor to focus on subjective areas and complex compliance areas such as related-party transactions, which require auditor judgement.
At this stage, auditors are not able to fully benefit from consolidated electronic data analysis as there are still a number of external providers that are yet to make their data available. However, in the next couple of years we should see many more providers joining the cloud paradigm.
As the SMSF industry continues to explore different ways to innovate, it is important that the auditor keeps pace, to stay relevant. Innovation means that a one size fits all audit approach would not necessarily be effective.
It has never been more important for auditors to provide a tailored audit service by considering all available data feeds, the client's control environment, workflow and data warehousing systems. Together such an approach should provide for an efficient audit and a seamless client experience.
Real-time auditing is close
The concept of real-time auditing or continuous auditing is getting closer to reality. With the amount of data being made available and the power of data analytics, continuous auditing will free an auditor to think about exceptions and be able to provide insights in real-time or near real-time. This has significant benefits in terms of identifying any compliance issues early on.
Artificial intelligence and robots lift the bar
An auditor's dream of possibly utilising robots to perform audit procedures might also not be too far away.
Some organisations have already released advanced machine learning robots that are trained to read, analyse and predict risks across supporting documentation such as contracts. This will mean that auditors will no longer be spending time reading and trawling through supporting documentation to perform the same analysis.
As machine learning robots become more advanced, we could see them being linked to material from the regulators, professional bodies and SMSF-related media to predict increased audit risks. There is no question that AI will significantly reduce the time it takes auditors to research and perform audit procedures. By freeing the auditor from the more mundane aspects of the audit, AI is expected to be able to enhance audit quality, while remaining cost effective in this highly competitive market.
As a result of increasing the use of AI technologies, the role of the auditor will shift towards a focus on exception based testing, and the provision of greater insights to clients.
Will robots take over?
A controversial topic among auditors is whether data analytics complemented by AI technologies could fully automate an SMSF audit without any human intervention. While an auditor's professional judgement and experience cannot currently be automated, it is clear that the profession will be enhanced and is capable of developing in important new ways.
But precisely how and when is not so clear.
Although what we do know is that the speed of change is no longer incrementally increasing, but taking off at unimaginable speeds.
As we think of the shifts into a knowledge economy that internet technology and the world wide web have made (a protocol system that is literally only 30 years old), we have to accept that as advanced analytics and AI technologies will transform the role of an auditor and raise the bar on client experience, so taking auditing to the next level.
Lisa Chehab, director for assurance and advisory services, Deloitte