- March 1, 2022
- Finance Automation
As someone who once worked in the world of Audit, I can attest to the fact that it is the bastion of boring repetitive tasks. Which, as it so happens, makes it one of the perfect candidates to benefit from an RPA tool. Audit has adapted quite significantly over the years, but fundamentally it runs on the basis of very specific rule-based tasks. Does X match Y? If X is more than Y, include in sample. You get the point…
Audit involves a lot of gathering of data, and copying and pasting of data, and inputting manual notes onto documents. These are incredibly time consuming tasks, but most importantly, they can be mind numbingly dull. The Big 4 firms are seeing a mass exodus from the industry as a result of the pandemic, and one can’t help but think that the actual work itself is one of the core reasons.
Something we always harp on about here at Solutionyst is the mental health benefits of RPA/Automation. Enabling employees to engage their brain, rather than burying their day in endless copying/pasting. Which, unfortunately, can be the reality of an audit junior. I know…I’ve been there!
Robotic Process Automation (RPA) in simple terms is a software tool which interacts with other applications in the same way a human would. It performs actions based on a set rule and trigger. This means that assuming the logic and ruling is consistent, it makes a perfect addition to an auditors arsenal of tools in order to make an audit much more efficient. Moffitt et al (2018) wrote a research article on RPA in the Audit industry, and described it as having the potential to disrupt the traditional audit model. So, fundamentally, on the surface RPA has the potential to not only improve audit efficiency, but also audit quality, and employee satisfaction as well.
Audit Applications for RPA Usage
I used very minor automated processes during my time in Big 4 audit. Primarily, they were small solutions which made the selection of samples a little quicker. But the focus of this wasn’t to save time and improve efficiency, the processes here were to create a “third party” selection process (IE – a robot select a sample, rather than a human). This meant that as auditors we could argue that the samples being selected had no element of bias from the auditor themselves.
However, we could have taken this one step further. For example, an RPA solution could be used to select a series of items for the sample, extract those items, and then send out the requests for backup of those same items to the client. All with the click of a button. This normally would have taken some time between selection, highlighting, extraction, approval and sending. However, with RPA something which might have taken 30 minutes to an hour, now takes seconds.
The main benefit of RPA usage within the audit world is certainly surrounding its ability to improve the audit evidence gathering process. RPA can take standard data and combine it with external sources and reconcile in order to create a fully reconciled audit paper. Whether that be Cash balances reconciled to bank statements, or invoices reconciled to expense log items. Assuming the process is streamlined enough, in theory, you could use RPA to fully automate a whole section of the audit process. For example:
- Select a sample from a list of expenses
- Send a request to the client for the invoices to match those expenses
- Monitor emails for receipt of the invoices
- Once received, match up the invoices to the selected expense balances
- If there are any errors, not these to the team
- If no error, display the outcome in the audit work paper
Obviously this is somewhat of an over simplification of the process, and nothing ever runs that smoothly. It is most likely that the client will drip feed invoices to you over time, and some will be missing or they’ll have accidentally sent the wrong invoice. However, what you can do is split an RPA process into two sections. The gathering stage, and then the reconciliation/reporting stage.
Because RPA can significantly improve the efficiency of an audit, it will inherently have improvements to the overall quality of the audit as well. This is because the auditors themselves will have time to manually work on the more complex aspects of the audit. With more time, there will be less pressure to complete the audit on time, which means no rushed decision making. The overall effectiveness of the audit process will improve. While the client often does not care about the audit itself, and just views it as a tick-box checking exercise, they will likely appreciate the improved awareness of the accounts that the team will have with less time-constraint. There’s no doubt that the audit client hates receiving last minute requests, so the time savings will also benefit the client in this manner too.