Introduction

Emerging technologies are altering the financial reporting environment substantially, and this change is accelerating. For example, artificial intelligence (AI), robotic process automation, and blockchain are changing the way business gets done, and auditors are leading by transforming their own processes.

In this evolving environment, it is more important than ever for the key players in financial reporting—auditors, audit committees, and management—to have a strong grasp of roles and responsibilities. As the use of emerging technologies in the financial reporting process increases, it becomes less likely auditors can design traditional substantive tests (e.g., test of details or substantive analytical procedures) that, by themselves, would provide sufficient appropriate audit evidence that respond to identified assertion-level risks. [1] This evolution in the sufficiency and source of audit evidence puts further emphasis on management’s internal control over financial reporting.

What are key technology risks to watch for? What are auditors focusing on when it comes to the impact of emerging technologies on business?

How are auditors evaluating whether management is properly assessing the impact of emerging technologies on internal control over financial reporting?

This post sheds light on these questions, with an eye on key technology developments: the internet of things (IoT), AI, and smart contracts. This resource builds on the Center for Audit Quality’s 2018 publication Emerging Technologies: An Oversight Tool for Audit Committees. [2]

(more…)