COVID-19 has accelerated the use of technology in auditing as businesses shifted operations online. A report reviewed how the top six audit firms use technology like data analytics for risk assessment and testing. While technology provides benefits from tools like AI and machine learning, it also poses risks if not implemented carefully. Algorithms can introduce biases from training data, but these risks can be reduced through design principles, testing, and employee training to ensure technology supports rather than undermines the audit process. As technology advances through natural language processing and blockchain, auditors must apply special attention and checks to ensure the technology's proper functioning.

1. Auditing and Technology
COVID-19 has brought in tremendous changes to every sector across the
world. Many businesses had to shut down, while the remaining shifted to
digital or online business. Technology has been part of auditing for a few
years now; but with the spread of the novel coronavirus, it has become an
inevitable part of the auditing processes. Every business has been forced to
change their modus operandi and had to learn the latest techniques.
The past few months have witnessed massive technological advancements
and changes in every sector, including the government
offices, in every country in the world. All began to sell their services online. As
for auditing, technology has been in use for a few years now with computer-
aided audit tools.
The Audit Quality Review (AQR) team at the Financial Reporting Council
(FRC) publishes inspection reports every year. This year a report was
published in March on the thematic review of “The use of technology in
the audit of financial statements” Samples of tech implementations at the top
six audit firms were considered for the review.
According to the review, the FRC concludes that all the firms’ common factor
was data analytics for audit testing. Data analytics is used for risk assessment
and substantive testing. Providing necessary training and tools for employees
at all levels can bring in more meaningful results. But there are
many difficulties that firms of all sizes face regarding the same. The data
analytics have added advantages of AI assistance, natural language
processing and machine learning.
More than the advantages, the FRC is trying to warn businesses about the
risks in technology. AI and other algorithms are made through machine

2. language, and it may be difficult for a commoner to understand.
These machine language algorithms can result in prejudices and biases from
the training data which can negatively affect the auditing process.
These issues can be resolved with design principles, ensuring that AI is
identified and performed by following good practice. Communicating with all
the employees is the next step to be taken to avoid such problems. The
biases can be reduced by clearing the training data, by removing the sensitive
fields, and through tests. The machine learning-based systems should also be
treated like any other system in the entity, only then can we keep the
technology under control without causing any issues for the company.
The proper functioning of the design principles, models, and controls will
boost any entity’s confidence and the service provider should be able to
assure the business owners.
Small audit firms use technology with ease, and this is due to the support of a
third party who works with the entity by following their methodologies and
approaches; this may not be possible for every auditing firm. The automated
algorithms will give you a 100% result on testing where a small data is
considered but it may not be the case for the entire population. The FRC’s
report highlights the growth of natural language processing and data analytics
which will be beneficial for the auditing sector.
The computers will now read and interpret the written language; this is seen in
some audit firms now where the computers take on by reviewing the contracts
and meeting minutes. Another technology that is gaining popularity in the
industry is blockchain. Theblockchain-based accounting system allows
making changes and self confirms many contents.
These new technological advancements bring immense help to the auditors
and make their jobs easy, but it requires special attention and regular checks

3. to make sure that the technology is not ruining the system completely. Dealing
with machines is easy unless you give them the power to destroy you.
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Auditing and Technology
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