We explore some of the reasons for the lack of adoption of emerging technologies in the assurance space.
The Fourth Industrial Revolution (4IR) and its associated technologies are creating a vast number of opportunities and millions of new jobs. Yet, accountants and auditors (collectively, assurance professionals) are not embracing these technologies at the same pace as other industries
Through our interaction with our customers and their assurance professionals, we have experienced a number of different reasons why they have not adopted new technology at the same pace at which it is being introduced. There are a select few that have dared to imagine the art of the possible. Their journeys have been revolutionary in transforming their departments, bringing more insight, credibility and progression into the assurance space. In most cases, though, it has been a challenge to motivate the use of new technology. Let’s explore some of the reasons for this.
Reasons for the lack of adoption of new technologies
Accepting that change is coming
In the first World Economic Forum (WEF) Future of Jobs Report in January 2016, assurance professionals were included in the Business and Financial Operations job family and were rated as stable. This was due to respondents believing that technologies such as artificial intelligence (AI) and machine learning (ML) would not have advanced enough by 2020 to have a significant impact on employment. Fast forward to October 2020, when the new WEF Future of Jobs Report was published, and assurance professionals are now listed as number 4 for job roles with decreasing demand. In just four years our job roles have gone from stable to redundant. Even the skills like ‘Performing complex and technical activities’, ‘Reasoning and decision-making’ and ‘Coordinating, developing, managing and advising’ are predicted to lose about 10% of their current task hours to technology.
Despite the writing on the wall, assurance professionals still tend to believe this change does not apply to them. Assurance professionals have become very accustomed to doing things the way they did them last year – and this mindset has encroached on their future thinking. Change is coming they said – just not for us.
Upskilling your capabilities and reinventing your ways of work requires going above and beyond. It means doing your day job as an assurance professional and then becoming digitally fit at night. This involves sacrifice and grit. Not everyone has the appetite to sign up for this and would rather stay blissfully ignorant.
Professional standards have not adapted at the same pace as technology
Another reason could be that the standards and regulation that govern assurance professionals have not considered the new ways of work. Assurance professionals are generally ruled based persons and like to operate within a governing framework. In fact, sometimes they hide behind this framework instead of challenging it. Perhaps using the outdated set of standards and regulation has become an easy excuse not to transform digitally.
Digital transformation is not easy and requires effort from assurance professionals to offer a solution to an answer. In a world where the entire population of transactions can be tested on a continuous and near real-time basis, what does materiality actually mean? Traditionally, a control passes if you have successfully tested the operating effectiveness of a sample of 25 items, yet if you test the entire population using intelligent automation but only 99% pass, does the control fail? What is an acceptable difference or error threshold when you use artificial intelligence to test the entire population, in which you may only achieve 95% accuracy in the test?
These are some of the questions we debate daily. Our digital audit procedures provide more coverage and more assurance performed in a more frequent manner – yet when they are quality reviewed, they are measured against current standards and regulations – and are marked down. How can that be?
Working with new technology requires a mind shift
When designing digital audit procedures with customers, they often want to simply automate the current manual efforts. Although this does create short-term capacity, it is not sustainable. In most cases, this just means inefficient and cumbersome audit processes have been automated. The result is that inefficient and cumbersome audit processes are still present in the environment and the technology is being blamed for not improving efficacy. This leads to further reason and justifications for the technology not being explored.
Often options are enemies. With a myriad of technologies and vendors now at the disposal of assurance professionals, the choice is overwhelming, causing the minds to shift into neutral. Experimenting with technologies in trying to make the right decision is time-consuming and costly.
The verdict of both of these mind shift scenarios is that it is easier to continue, as they have always done their work using a manually intensive army of human auditors.
To truly embark on the journey of embracing new technology, a mind shift by assurance professionals is needed. We need to make the choice to completely reconsider how we perform processes and procedures and start from scratch with a digital mindset when designing processes and procedures.
Embracing new technologies
So, how do we overcome these barriers and start embracing new technologies?
Start with change management It is important to work with the stakeholders and get them comfortable with the technology being used. Teach them how to make the mind shift and start thinking digitally. Take them on the journey to embrace technology.
Start small Do not start with the most complex and biggest processes and procedures in your business. Start with a relatively simple and repeatable yet time-intensive process and procedure. This will provide quicker value, get quicker buy-in, and create a sense of accomplishment.
Start with consideration for the current standards and regulations Although these may have not been updated for current technologies and ways of work, they still govern methodology. Consideration for the standards and regulations could also help decide in which area to start in your business.
Start Just start. Start somewhere, anywhere, but do not get left behind. We need to embrace new technologies, become digitally minded and transform ourselves and our profession.