The fast digital development is currently having a profound impact on central government and creating new practices in financial audit work. We have already for a long time utilised digital material extensively in central government financial audits. Nevertheless, financial audit work is expected to undergo considerable changes in the future.
Digitalisation causes challenges to central government financial audit in its traditional form. The application of automation and analytics in audits keeps increasing. When repetitive mechanical tasks are automated, the number of routine-like tasks decreases, while the efficiency of financial audits increases.
The digitalisation of audit work has indeed many positive impacts. The use of digital materials ensures that an audit can be based on a comprehensive examination of transactions instead of a single sample. This makes it possible to issue more reliable opinions even more efficiently than before.
By utilising digital materials, we can drill down to the implementation of extensive processes in detail. Communicating in a more real-time manner, in turn, makes it easier to correct any errors before the financial statements are published. Moreover, the mere analysis of digital materials provides valuable new information even to the customer. Digitalisation enables, for its part, the auditor to use a consultative audit approach with the customer.
More efficient and automated financial audit
To financial audit, digitalisation thus means comprehensive streamlining. It will be easier to centralise and automate audits, and robotics will possibly also be used to an increasing extent. This also applies to the verification of transactions by means of receipts in electronic archives. Analytics begin to be so advanced that, in addition to traditional structured data, they can also identify other kinds of data in electronic archives.
The availability and management of digital data are becoming critical success factors, which cannot be overemphasized. Ensuring the availability and management of data poses a challenge both to the National Audit Office and to central government in general.
In an audit environment that is becoming more and more digitised, the focus in financial auditors’ work is not on audit routines but more clearly on issues that are essential in order for the audit opinions to be reliable. The applications available to auditors support audit work increasingly by, for example, reducing the need to save data manually.
Because of the digital development and process automation, auditors obviously need new skills. Part of this change will result from completely new kinds of tasks. Controlling, testing, operating and re-training algorithms are examples of tasks that some auditors may perform. The maintenance of analytics and the required digital data also requires financial auditors’ efforts.
A financial auditor gives meaning and manages the audit risk
In financial audit, living amidst the sweeping changes means that even the latest audit techniques, such as those based on artificial intelligence, may soon seem outdated and need modernisation. Important factors to be considered in the application of new audit methods are necessity and discretion.
If you opt out of the process for developing financial audit, you lose your competitiveness, which makes it necessary to participate in the process. Discretion, in turn, should be used when considering the allocation of funding and the maintainance of solutions, and when ensuring flexibility.
Despite the change, financial auditors will continue to be needed. A financial auditor is the person who interprets and gives meaning to the results and findings of analytics in the foreseeable future. The typical questions for public administration related to compliance with law will continue to be part of financial auditors’ duties even in the future, although digital tools will help to reduce the time it takes to establish this.
Digital audit methods are not completely problem-free, either. One of the potential risks with them is, for example, that they may narrow the perception in external audit. Issues not falling within the algorithm questions will be paid increasingly less attention, and, in machine learning, an algorithm may evolve in an undesired direction. The need to anticipate and manage these risks will contribute to ensuring that financial auditors’ work and position will continue to be important in central government financial audit.
The interaction that takes place during an audit process will also continue to be largely based on human activities. Moreover, the development of systems and the increased degree of automation in the accounting offices will create new kinds of audit needs.
As a developer, I find work related to digital audit methods both challenging and rewarding. Development work is like a combined athletics event where the focus is not only on identifying opportunities and defining analytics but also on the implementation of solutions and cooperation both within the agency and with our stakeholders. Fortunately, the challenges posed by the implementation of digitalisation can be divided into manageable entities, and we are looking for solutions together. The general development of central government financial audits also provides a cornerstone for the development of digital audit methods. There is a favourable atmosphere for the development work in our office.
Periods of technological transition cause challenges to workplace communities and their members. However, I am optimistic as regards digitalisation, since in the light of history, new methods have typically been found better than the old ones, and in practice, no one has wanted to go back to the old ways of working. Digitalisation provides an opportunity, and we have seized it in central government financial audits.