The future of group audits: Embracing technology and adapting to change

AI-Powered risk assessment and fraud detection

Assessing risk and detecting fraud across multiple group entities can be a daunting task, particularly when dealing with vast amounts of data. However, artificial intelligence (AI) is proving to be a powerful ally in this task. AI-powered tools can analyze vast datasets, identify suspicious transactions, and generate risk profiles for each entity within the group.

By leveraging machine learning algorithms, these tools can continuously adapt and refine their risk assessment and fraud detection capabilities, ensuring that auditors are always ahead of the curve. Additionally, natural language processing (NLP) can be used to analyze unstructured data, such as contracts and agreements, further enhancing the auditor's ability to identify potential risks and red flags across the group.

Blockchain and continuous auditing

Blockchain technology also offers a new way to improve group audits, making them more secure and open. Blockchain supports auditors checking transactions as they happen, instead of reviewing them later. The approach, called "continuous auditing," where financial activities are examined in real-time or very soon after they occur, differs from traditional auditing methods, where checks are done periodically, often annually.

The ongoing approach behind continuous auditing makes auditing faster and gives everyone involved a clearer view of what is happening, especially valuable in group audits. Because blockchain records can't be changed once they're made, auditors can rely less on manual checks and feel more confident that the financial information is correct and can be relied upon across the entire group.

Regulatory compliance and legal considerations

As technology continues to reshape the auditing profession, governments and regulatory agencies are taking notice. With changing professional standards and increased scrutiny, auditors must stay ahead of evolving regulations to ensure compliance across the group.

Most recently, the Public Company Accounting Oversight Board (PCAOB) adopted amendments (PDF)  to two of its auditing standards, AS 1105, Audit Evidence, and AS 2301, The Auditor’s Responses to the Risks of Material Misstatement. These amendments addressed some audit procedures involving “technology-assisted analysis of information in electronic form.”

The Board stated that these amendments should help reduce an auditor’s reluctance to use technology-assisted analysis under existing auditing standards by clarifying auditor responsibilities in using reliable information in audit procedures and audit evidence for multiple purposes in addition performing tests of details.

Failure to adhere to these and other existing and evolving standards can result in significant fines and potential legal liabilities for audit firms and individual auditors. Regulatory bodies are increasingly utilizing advanced technologies, such as AI and data analytics, to uncover errors and deficiencies in group audits, making it imperative for auditors to prioritize compliance and implement best practices across the group.

Talent acquisition and skill development

The digital transformation of group audits demands a paradigm shift in the skill sets required of auditors. While traditional accounting and auditing knowledge remains essential, auditors must also possess technical skills in areas such as data analysis, coding, and cybersecurity.

To meet this demand, audit firms are actively recruiting candidates with diverse backgrounds, including data scientists, engineers, and computer science graduates. In addition to heavily investing in technology, firms are focusing on upskilling and continuous learning programs to ensure that existing auditors have what it takes to meet the transformational changes occurring in the audit profession.

Furthermore, soft skills such as collaboration and communication remain crucial in navigating the complexities of group audits. Auditors must be able to effectively share information across multiple entities, communicate findings to stakeholders, and address the complex relationships within the group.

What’s ahead

New technologies, combined with the more complex and stringent global regulatory environment, demands a paradigm shift in how we approach the complexities of auditing multinational entities.

As we embrace centralized data management, AI-powered risk assessment, blockchain-enabled continuous auditing, and other emerging technologies, auditors are not just enhancing efficiency—we are fundamentally reimagining the audit process. These advancements offer unprecedented opportunities to improve accuracy, increase transparency, and provide deeper insights into the financial health of complex organizations.