Is auditing the only paper process left in Finance?
Anders Liu-Lindberg
Leading advisor to senior Finance and FP&A leaders on creating impact through business partnering | Interim | VP Finance | Business Finance
This article is sponsored by Konsolidator. Konsolidator has recently launched their new product, “Konsolidator Audit” which helps auditors automate their clients’ consolidation process. Go learn more about Konsolidator Audit here.
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Many auditors are still stuck on paper when everyone else in Finance has gone down the automation path.
With integrations between most software today, you would think auditors had followed Finance and stepped into the digitalized world. But somehow, that is not the case.
Let me tell you about my experience with being audited. I have tried these many times as a controller and a finance manager. In Denmark and abroad. Wherever and in whichever capacity I was involved in audit there was one common denominator. Paper!
Here is how it worked when our consolidated accounts were being audited. We would create reports in our system with neatly arranged schedules showing top deviations, including explanations entered directly by the entities. On the rare exception, we would link the system to Excel to gain more flexibility with creating schedules.
Regardless of our setup though the product was a printed piece of paper to be put in a binder for the auditors to review at their convenience. It truly felt like the audit was the only paper process left in Finance!
From paper to PDF
Granted my accounts from audit dates to 2014 and before. Still, not much has changed since then, has it? Perhaps the papers have simply been converted to PDF files so we’re just saving a few forests while the process largely remains the same.
It’s even worse when auditors are also helping small and mid-sized companies do their consolidations. Auditors would audit the financial statements of the individual entities in a group and then do manual consolidation in Excel at best. Excel on top of a paper-filled manual process hardly makes it digital!
There are better ways with APIs and seamless integration between most software today. Especially since auditors often form longer-term relationships with their clients it should be worth the time and investment needed.
Just import the trial balance from the accounting system and run your needed audit checks. Once done for all companies in a group you can easily consolidate the accounts with a standard format available. Even if no consolidation is needed this should be preferable for auditors.
The audit paper paradox
Come to think of it audit really is paradoxical. By most considered THE most likely profession/process to be automated as it is rules-based yet perhaps the only paper process left in Finance. The real question is what is stopping auditors from going digital?
We could argue that it is the same as what is stopping the rest of us. Wanting to stay within our comfort zone. Fear of losing our jobs. Perhaps even fear of clients realizing that there is very little value added in the auditing process and it merely provides a rubber stamp on the books. It’s hard to tell of course but it figures to be only a matter of time before some real digitalization occurs.
When according to Accenture 60% of transactional finance processes are automated today (up from 34% in 2018) then the same thing is bound to happen to audit. You didn’t hear it first here, but I hope it makes you wonder again why auditing hasn’t moved further along the digitalization path. At least it should make you question how your auditor is operating especially if they are supporting you with more than just the base level auditing requirements.
How do your auditors work? Do they request a lot of paper for documentation (perhaps PDFs but still) or have they found a way to digitalize the processes? Share your experiences with auditors in the comments and let’s see if it truly is the last paper process left in Finance!
Continue reading below for more articles about how digital is impacting Finance.
Anders Liu-Lindberg is the co-founder and a partner at the Business Partnering Institute and owner of the largest group dedicated to Finance Business Partnering on LinkedIn with more than 10,000 members. I have ten years of experience as a business partner at the global transport and logistics company Maersk. I am the co-author of the book “Create Value as a Finance Business Partner” and a long-time Finance Blogger on LinkedIn with 65.000+ followers and 140.000+ subscribers to my blog. Recently I became an advisory board member at Born Capital to help identify and grow the next big thing in #CFOTech.
CFO| Business Growth Adviser|Board Member |
3yI totally agree , this process needs to be digitised and It is already happening. Most organisation are moving to a paperless environment and documents are now kept in digital form. I belive this will force the auditors to relook how audits are done At the end of the day it is about getting the necessary assurance and not the amount of paper you look at.
Owner CPA firm
3yI went paperless 10 years for audit documentation and procedures but I only did about 10 audits a year.
Financial Modeler, Data Analyst.
3yJibril Jibo
Senior Auditor at PwC
3yAuditors need reliable evidence that issued documents not only are correctly accounted for , but were properly signed and authorized. So having audit follow up the the digital trend as is in other finance areas is directly related to the advancement of reliable digital signatures and electronic authorizations in addition to the security of the data bases they are being stored in.