Impact of Emerging Technologies on Auditing Processes for South African - Auditing Assignment Help

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Research Topic
The Impact of emerging technologies on auditing processes for South African auditing firms
IntroductionIn today's digitally driven world, the world is moving faster than ever and is more technologically connected than ever (American Accounting Association, 2017). New technology, such as Big Data, data processing, mobile technologies, and cloud computing systems, are being developed to address a wide spectrum of economic demands (American Accounting Association, 2017). These innovations are intended to have greater stability, economies of scale, mobility, and precision (American Accounting Association, 2017). The pandemic has altered people's daily behaviors worldwide, and the new realities of lockdowns and social distancing have expedited the adoption of new technology. The demand for communication tools such as Microsoft TEAMS and ZOOM has reached an all-time high as hundreds of millions of individuals have been forced to work remotely from home (Tosh 2020). Throughout the world, businesses are purchasing any new technology they can get their hands on in the hope that it can provide them with a competitive advantage, however small (Alexander Brem, 2016).
While these businesses are the at an accelerating rate, this paper focuses on the auditing firms that audit their financial statements. The technological revolution has had an impact on every facet of business, though not in equal measure. Since auditors have typically been viewed as "technology pessimists," these auditors are likely to have seen the latest technological revolution slightly later CITATION Acc21 \l 7177 (Accountancysa, 2021). The following paper examine business technological developments, the degree of adoption of such technology within auditing firms in South Africa, and the potential prospects for these firms' technology platforms, processes, and expertise.
Auditing firms provide financial auditing services on their clients, both public and private sector. Regulators such as the Johannesburg Stock exchange and Companies Act compel public companies to undergo audits to ensure that financial records are not materially misstated. Private companies use auditors for several purposes, the most important is to provide assurance that their financial statements are not materially misstatements to their stakeholders. This paper examines the external auditing industry in South Africa, focusing on the technologies employed in audits processes. Although financial audits are conducted during the year, the majority of engagements and the most labor-intensive ones occur shortly after the client's fiscal year ends, with the majority occurring on December 31st, June 30th, or September 30th. The auditors review and test their companies' year-end financial results during these engagements. January through April is called the "Busy season," when the largest number of businesses reach their fiscal year on December 31st. Due to the significant number of engagements, auditors work longer hours at this season than they do throughout the rest of the year.Research problemThe auditor's role became more complex as industries and economies expanded but became simpler when internal controls were implemented Harvard Law School Forum on Corporate, 2019). Still, as technology advances at a pace unprecedented in human existence, auditors face a new obstacle. Although auditing firms are embracing many of these innovations, they often fall behind their clients in terms of technological acceptance CITATION Acc21 \l 7177 (Accountancysa, 2021). Continuity from year to year is a critical component of an audit (Byrnes 2018). Staff auditors examine the previous year's procedure to decide what actions to implement in the new year (Byrnes 2018). In principle, this seems to be an efficient and straightforward method of risk mitigation from year to year; however, if the client's procedures change year to year, examining the prior year’s information could be ineffective or irrelevant.
Where a customer previously invoiced purchases manually and then passed the invoice to a manager for review, an audit procedure may include observing the invoice being prepared and tracing the chain of custody to the manager. If the current year has passed and the clients has modified their program in such a way that paper invoices are no longer produced.
In today's increasingly paperless workplace, the invoice is merely deposited into the system via one employee's account, and only approved by the manager by his/her account. Under this case, the previous year's audit plan will be obsolete.
Another area where audit teams fall behind is in the concept of a "real-time economy." Businesses' processes are modified in real time: tracking-tagged packages are scanned automatically upon departure and delivery, transfers are almost exclusively electronic, and orders can be made and collected electronically. Having all of these disparate processes in electronic form and, most significantly, linked to a business's internal structure, ensures that a business still has an accurate picture of its current state. More importantly, management will track their company's sales on a minute-by-minute basis, enabling them to make more timely and knowledgeable decisions. In the other hand, audits are conducted without regard for the real-time economy. If a company's fiscal year ends on December 31, the audit team may usually arrive in late January, conduct checks over a month or two, and will be ready to give an opinion by late March. If audit teams should embrace the concept of real-time review, they could conduct their checks in December, when connected to the client's infrastructure, analyzing all transactions to the December 31st year-end, and will only need to be present in early January to conduct any post-year-end checking. Auditor insistence on a retroactive audit is an outmoded philosophy.
Not only do auditors routinely review previous year workpapers and determine how to test the current year's financial statements, but they often review the financial statements themselves. Audits conducted in January and February were entirely focused on historical company practices, with certain audits examining transactions that occurred more than a year earlier. Audit teams want to have sufficient assurance that a company's financial records are not materially misstatements, but just up to an extent.
The International Auditing Assurance Standards Board (IAASB) has recognized the rapid pace of technological advancement, especially in the area of big data and its potential effect on an audit's performance (IAASB, 2016). ACCA (2015) also recognized the effect of big data on the audit sector and urged audit companies to redesign how they conduct audits with the use of digital technologies.
ISA 200 allows the auditor to use ethical judgment while conducting an audit (IAASB, 2009). While audit methodologies include this requirement, they assume that humans, not robots, practice professional judgment. However, if some activities become automatic, the audit plan will need to be adjusted to account for the transition from manual to automated tasks (Kend & Nguyen, 2020). This will then include further testing of the control algorithms and decision-making processes used in machine learning (Kend & Nguyen, 2020). In essence, a stronger focus should be placed on auditing the machine (Zhang 2019)
Despite widespread attention to the impact of technology on auditing producers, minimal research has been conducted on the impact of technology on auditing processes in South African auditing firms. There are several technological hurdles in South Africa's accounting and auditing firms. The country's usage of technology is not as extensive as that of other nations worldwide CITATION Int17 \l 7177 (International Telecommunication Union, 2017). Some medium local auditing companies continue to employ manual techniques, since most small and medium-sized companies cannot afford the audit costs associated with employing an auditing firm (World Bank, 2011). Additionally, not all businesses need auditing; certain businesses are exempt from auditing under the terms of their charter. As a result, some enterprises may only request an audit of their financial accounts when applying for loans from commercial banks. Additionally, businesses cannot afford the costs associated with acquiring an accounting information system and audit software, preferring instead to utilize Excel and Access (Microsoft). Companies will do a cost-benefit analysis; if the expense of acquiring software outweighs the advantages, firms will engage and educate personnel to complete the activity manually and assign them laptops or desktops. Due to these difficulties, audit quality is poor, reporting mistakes are frequent, work completion times are lengthy, and productivity is poor.
PurposeThe purpose of this research is to determine whether audit firms in South Africa are embracing modern technology approaches and processes. Second is to ascertain potential barriers to technology adoption and potential prospects for success. Conducting this study will assist auditors in reducing the time required to perform audits, resulting in increased efficiency and cost savings. The advantages of incorporating newer technology into the audit process are numerous as per literature below. The application of artificial intelligence and big data may result in more effective audits, both in terms of audit quality and cost (Jiali & Khondkar, 2017; Zhang, 2019). In recent years, auditors have seen various negative headlines linked to political corruption and unethical behavior within the profession. With recent scandals involving Steinhoff and VBS, it is evident that financial record transparency among stakeholders is critical. This developing technology can alleviate trust concerns and accelerate auditing processes. Numerous studies have examined the influence of technology on auditing processes, but few have examined the issue's perceived relevance in South Africa auditing firms. The purpose of this research is to determine the effect of technology on auditing processed in South African auditing firms.
Research questionsA Financial auditing processes are always evolving due to the rapid growth of technology in the accounting and auditing professions. It is questionable how technology is influencing financial auditing.

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