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Auditing Fraud: Technology at the Forefront of the Issues…

October 20, 2013

Auditing is a delicate process, one which has not been changed in years. From the way you prep the material, to giving the final statements on various findings within a company, auditors seem to stick to the same process that have been used for years. It is not that people thought the auditing profession was immune to change, but it was a change that would need to affect the world and one that would not be the easiest to accomplish.

Of recently, technology has fully taken over the world, and has slowly started to dominate the auditing world. With this dominance comes speculation to many in the field with the big question being: Is this going to help or hurt the profession even more? Here are some of the topics that have been buzzing around technology entering the auditing field.

Auditing involves a great deal of researching data and ensuring that everything is accounted for. With that comes a vast amount of paper documents to sort through, which could take weeks. To make this process efficient, it involves a team that communicates extremely well. If this wasn’t hard enough as it is, companies are now starting to gain a large international presence, creating even more communication needs not only on the audit team, but to the entities that are overseas. For this, information is now beginning to be stored on the internet which allows access to the information for each audit to be accessible anywhere within the company’s network.

The catch you ask? With this information being placed in online folders, everyone on the audit can now access it at their own leisure. Information that is vital to making personal financial decisions and give that upper hand on various upcoming business decisions could be sitting on anybody’s screen, at their desk, at any time of the day. The temptation to view these files with the intent to use them in a personal manner increases with such easy access to the documents in their own privacy.

What also comes into play is learning these new systems. Cindy Fornelli, an executive director for the Center for Audit Quality, states that with these improvements comes an “increased risk and complexity” which starts to change an auditor’s “independence, objectivity and skepticism”. These three components are essential for auditors so that they view each entity similarly with no biases or attachments to the decisions made in any way. By having all of the information stored in a folder, auditors could feel like the company is trying to hide something and not place that information in the folder causing distrust.

With technology now playing a big part during the process, there are now even more ways that fraud can occur. Being able to continuously be on the internet no matter where you are allows for constant communication, but it also can lead to shortcuts in and around multi-million dollar frauds. It only takes one very tech-savvy individual to break into the system and change one number to benefit their earnings by thousands overnight. Now, with the younger generations of people moving up into the field and being more technology dominant than almost any other generation, it will be interesting to see what types of new frauds could occur if these individuals were given enough information.

Another outcome of moving the audit process to a more technology based process is the data extraction and analysis software. This software allows for auditors to test entire populations at a very high rate to search out possible frauds in the company that may be occurring. At first, this seems like an awesome idea. When I look at this, auditors may begin to rely too much on what this automated system does, and only take the information it discovers to the table instead of personally digging into the data. It only takes one tech-savvy individual to override the system to cover up the fraud and make it so it does not appear during the analysis. It is as simple as that, which I believe could prove very fatal to the auditing profession as a whole.

Think what you may about technology and all of the great perks that come with it, but really look at the effects it may have on the accounting profession. With the younger individuals now rising up into higher positions, the pressures to do well only increase, thus opening their eyes to how easy it could be to commit a fraud. I can only hope that technology only makes the audit process easier, but there will be many stops and goes along the way to prove as to which process is the better method.

-Mike Thomas

http://www.accountingtoday.com/ato_issues/27_8/The-next-wave-in-auditing-67578-1.html

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