Interview with Fergal McManus, Account Manager, Ireland & Channel Islands at Confirmation, part of Thomson Reuters.
The shocks of 2020 – the COVID-19 pandemic and the consequent national and regional lockdowns – brought dramatic changes to Ireland’s auditing world. This year has seen a more gradual, but no less significant evolution, in the continued growth of audit technology and remote working.
“My overriding opinion is that firms have completely adapted their position – and without significant disruption,” says Fergal McManus, Confirmation’s account manager in Ireland and the Channel Islands.
“Based on our perspective,” he continues, “auditors have almost entirely switched to remote working. There was a period of transition between March and June 2020 when firms were getting used to new processes – working from home and auditing remotely – but they’ve really adapted their approach and it’s been seamless ever since. The big four had the advantage initially, because of their access to the best technology, but smaller firms have taken up the challenge, caught up, and are perhaps benefiting more.”
This response has led to permanent change. “Hybrid working is clearly the phrase of 2021 and likely to be the new way of operating. It’s the narrative coming out of Irish and other European firms. For example, a recent PwC UK study found that 84% of employees feel able to perform their role remotely, and want to retain some element of working from home. I think that’s the feeling in Ireland, too.”
On the subject of remote auditing, McManus believes that a similarly hybrid approach will emerge. “There’ll be in-person collaboration and communication with the client onsite – auditors getting into the client office to talk to people individually and examine things. Because they’re now able to combine site visits with remote meetings, benefiting from the experience gained during the pandemic.
“And remote auditing allows for more creativity, for involving more company staff in the audit process, while relieving pressure on the audit team to schedule in-person meetings with required individuals.” He cites the argument made by Deloitte’s Paul Stephenson that “our work is likely to be through a mix of in-person and virtual interactions, creating a real opportunity for the profession to become more inclusive”.
COVID-related fraud
As to other effects of COVID-19, McManus says it’s hard to tell whether the pandemic has led to an increase in fraud in Ireland, “but past crises show that the risk of fraud and corruption grows as businesses struggle, and a few become desperate to paper over the cracks. Both tend to increase when there are greater incentives or pressures to engage in misconduct and more opportunities to do so, where attitudes become more permissive towards ‘borderline’ conduct or where individuals find it easy to rationalise these behaviours.”
The Irish Auditing and Accounting Supervisory Authority (IAASA) is currently consulting on its exposure draft of ISA (Ireland) 240. “This requires auditors to ‘obtain reasonable assurance’ that the company accounts they’re looking into don’t mislead due to fraud,” he explains. “My own focus is on audit technology and its role in combating fraud, and I’m sure this review will recommend reducing risk within the firm’s methodology, and this is where we can help.”
Future of audit
When asked how the audit landscape might evolve in future, McManus replies that “firms nimble enough in their use of tech and remote working will benefit themselves and their employees. There’s been a lot of engagement from smaller and medium-level firms. They’ve been racing against time to get themselves up and running but are now profiting from adopting new approaches. For example, they’ve experienced lower costs as a result of reduction in business travel – and can reinvest those cost-savings in new tech.”
Firms are investing in tech that saves them time and enhances security and efficiency. “There’s a wider use of data analytics tools that enable auditors to make better judgements on quick turnaround engagements. Tools like predictive analysis are changing how we undertake an audit and will ultimately change what the future audit will look like.”
He believes that initiatives across multiple technologies – such as artificial intelligence (AI), blockchain and cybersecurity – will equip audit firms to deal with their clients’ emerging technology-driven risks and safeguard their digital assets.
“AI can plough through vast tracts of data and perform analysis in a way that’s impossible today even with teams of auditors. This will vastly improve auditors’ testing techniques, and ultimately lead to a shift in how a financial audit is performed. It’s not a question of whether the audit firms need to change but a question of how fast.”
McManus observes a growing trend among auditors towards partnering with third-party providers in developing their digital platforms. “During the next couple of years,” he says, “there’s likely to be a move away from product vendors and a concentration on stronger relationships with a select group of specialist business partners, like Confirmation. Firms are not just using us as a vendor but are looking to integrate with our platform – to enhance their user experience and benefit from the APIs and automation. Given the many fraud cases both in Europe and the US relating to falsified bank confirmations and failings in audit quality more broadly, it’s crucial to take stock of your technology and processes to mitigate these ever-present risks.”
Confirmation, part of Thomson Reuters, pioneered the idea of digital confirmations in 2000 and still leads the industry today. More than 16,000 audit firms, 4,000 banks and departments, and 5,000 law firms have put our platform to work. We span 170 countries and process more than one trillion dollars in confirmations each year.
This article is sponsored by Confirmation.