How advanced technology creates new possibilities and requirements for financial reporting and auditing
By Jeff Koyen
Technology continues to change the way businesses run their finance function, and most executives are fully aware (and support) of the role of technology within their organizations. But exactly what benefits does technology bring today, how will that change in the years to come, and how will technology influence the next generation of finance professionals?
These questions were at the heart of Forbes Insights’ May-June 2021 survey of 250 senior U.S. finance executives, conducted in collaboration with KPMG LLP. Executives represent all major industries and work in organizations with at least $ 1 billion in global revenue in the most recent fiscal year. We also spoke with several KPMG executives to give the data better context.
What do leaders expect from their technology?
âCompanies are constantly looking for more in-depth information about their business,â says Heather Paquette, national leader in technology assurance, KPMG. âUsing smart analytics and artificial intelligence gives them this information, both to drive business value and to make financial decisions. “
Smart Analytics and Artificial Intelligence: Add cloud computing and you’ve got what you might think of as the Financial Technology Dream Team. Advanced computing, blockchain, and automation technologies, such as robotic process automation (RPA) and business process automation (BPA), also play an important role.
What solutions will be adopted the fastest by the industry and how will expectations change as a result?
What technologies and why
As the survey shows, finance executives are well aware that artificial intelligence and other advanced technologies are used in their industry. And since it’s as expensive as it is powerful, the latest financial technology has to be practically justified.
The most obvious benefit for executives is getting better insights from more nuanced data. As Scott Flynn, KPMG vice president of audit, says: âIn conversations I have with senior executives … this is what they are looking for: the knowledge that the data is able to identify.
In terms of the essentials specific to their internal finance functions right now, most executives indicated cloud computing and storage (74%); intelligent analysis, including data extraction and transformation and data visualization (62%); and artificial intelligence, which includes machine learning and natural language processing (56%).
Most executives expect BPA (43%), process extraction technology (42%) and RPA (48%) to be required financial capabilities within two years.
âThe automation of robotic processes is underestimated these days,â says Paquette. “He should be higher on the executive radars.”
Many executives expect blockchain (51%) and edge computing (36%) to become important internal tools within five years, but not for another three.
Internal functions versus external auditors
For most business leaders, internal reporting is only one facet of the finance function. The role of the external auditor is often just as important, as is the auditor’s use of the latest digital tools.
Almost all executives (98%) said their external firm uses advanced technology in the audit process, and most agree that this improves the quality of the audit (98%). (This represents a marked change from just three years ago, when 74% of executives rated the use of advanced technology by external auditors. Digging deeper, only 26% of executives in 2018 considered the artificial intelligence as a must-have for the figure is 61%.)
According to executives, the use of advanced technology provides deeper insight into areas of increased risk, provides better benchmarking and increases data coverage.
The majority of executives also say that advanced technology improves their customer experience (94%).
Perhaps this is the reason why most executives (58%) view external auditors as more technologically advanced than internal finance functions. Only 8% of executives think their own use of technology is more advanced.
These results do not surprise Flynn.
âWe need to be able to prepare, perform and execute audits for companies across a broad spectrum,â he says. “Things move with them, but [also] anticipating where they are going.
While agreeing with Flynn’s assessment, Christian Peo, National Managing Partner, Audit Quality and Professional Practice, KPMG, believes it is equally important to pay close attention to this minority of senior finance executives. the technological avant-garde.
âTo keep pace with these 8% who are changing and innovating so quickly, we need to invest and spend time and live up to how they are changing,â says Peo. âWe have to follow them and we have to spend – it is an opportunity to improve the quality of the audit. “
So where should external auditors invest to stay current and meet these heightened expectations?
âData and analysis,â explains Paquette. â60 to 70% of controls should be automated in the next five to ten years. … We are also evolving our audit approach with the companies we audit.
The future of talent
Conversations about AI and automation often center on the risk to human jobs: will robots replace humans? The answer, of course, is “No”. Automation will change the way many industries operate, but the âhuman factorâ will prove irreplaceable in some functions.
For finance, Flynn says, âThese people who are intellectually curious and able to learn from disparate data pools, these people are going to be truly exceptional. â¦ They have a role to play in the future of auditing and, frankly, finances in the future.
Flynn believes technology will change financial information in ways that improve the lives of financial professionals, including auditors. In the form of machine learning and natural language processing, for example, AI can automate tasks that require tedious manual monitoring. As the adoption of AI grows, more of the industry’s human capital can be devoted to more creative tasks.
Seen in this light, it makes sense that the financial professionals of tomorrow will be sharp and insightful thinkers. Most executives say their financial reporting staff need critical thinking, reasoning, and problem-solving skills (80%); financial skills in investigation (66%); and an ability to achieve specific goals by developing relevant data analyzes (66%).
âThe ability to do a deep analysis and make correlations from separate data is going to be very important,â says Flynn. But, he adds, it goes without saying that mastering the technology will also be important.
This is because the jobs of new generation auditors may be more technical in nature than those of their peers working in internal finance functions. For the former, our leaders favored mastery of AI, RPA and blockchain (76%) and training in data science (75%).
âWhether it’s data and analytics or the use of robots in audit procedures, we believe the next generation of auditors should have basic technology skills,â Paquette explains, âand they need to fully understand financial processes and this intersection of risk between finance and technology. “
While he recognizes that technical competence is vital for the rising generation of finance professionals, Peo offers an important caveat: “[T]you also need traditional skills: being able to talk to management [and] the audit committee in an understandable way, take very detailed conclusions that are discovered through the use of technology and present them in an understandable way in non-audit language.
The âhuman touchâ will never become obsolete.
Towards greater automation
For good reason, digital transformation is a constant concern of most leaders. As the survey reveals, financial technology is evolving rapidly and bringing changes in the industry.
Trends towards greater automation are apparent, as are preferences for technology that produces better information. Executives are asking their own organizations to stay on the cutting edge of technology, which in turn puts increased pressure on their external auditors.
It’s the future, says Paquette.
Executives want to optimize and âdigitize their business holistically,â she says. “These trends will continue to increase, both in driving business transformation [and] drive the automation of auditors.
For more on this topic, please read the full Forbes Insights-KPMG report., Standing the test of time: how technology is driving change in finance and auditing
Jeff Koyen is an award-winning journalist, media entrepreneur and an early cryptocurrency investor. He lives in CuraÃ§ao with his family.
The views and opinions expressed here are those of the survey respondents and do not necessarily represent the views and opinions of KPMG LLP.