Technological advances

Question 1

What is digital transformation

Answer 1

Incorporating digital technology across all areas of an organisation processes, products and operations to identify ways to improve operational efficiency and bring products to markets faster.

Question 2

examples of digital
transformation

Answer 2

Implementing a new system e.g manual or computer based

Retailer moving to online shopping.

It can be as simple as just an upgrade for software becoming obsolete (outdated) or implementation of completely new technology.

Question 3

What the auditor is concerned with relating to digital transformation

Answer 3

How the digital transformations affect the accounting system and reporting process.

Question 4

Benefits of digital transformation

Answer 4

Improve efficiency freeing time for employees to do more value added tasks

Automated systems may allow for internal controls often better than manual ones.

Increased security as newer technology is likely to have defense against security risk e.g cyber attacks

Improved stakeholder satisfaction from improved speed of delivery and output.

Question 5

Limitations of digital transformation

Answer 5

If not carefully budgeted and unforeseen cost arrive, it may fail as it is expensive. More problematic if half way through transformation- lost data etc.

May be employee resistance to new technology

Employees may need training as don’t have current expertise

Question 6

4 emerging technology and how it impacts auditing

Answer 6

Robotic Process Automation

Artificial intelligence

Cloud computing and cloud accounting

Digital signatures

New technology pertaining (relating) to financial reporting Changes the process resulting in new risks to auditors.

Question 7

What is robotic process automation.

Tasks done

Answer 7

A solution that replicates a business process that would have been done manually.

Simple tasks such as opening emails or copying files.

More complexed tasks such as calculations and extracting data from web

Question 8

Risks of robotic process automation

Answer 8

Risk depends on the task completed.

It is more suited to standardised ( fixed rules) repetitive data where as it may struggle with irregular data requiring judgement.

If a process has many exceptions to the rules then it may struggle ( unusual cases where it doesn’t follow the normal pattern)

If a lot of manual work involved, it may be beneficial and save time. If not, the risk may be greater than the benefit

Question 9

What auditors need to consider regarding Robotic process automation

Answer 9

Act with professional scepticism and avoid automation bias ( don’t assume financial reporting is correct as automated)

Question 10

What is artificial intelligence.

Uses and benefits

Answer 10

Advanced computer systems performing tasks requiring traditional human intelligence.

The technology can learn from data and problem solve.

Using a virtual assistance to resolve queries

Automate cash matching process from recognising patterns.

Question 11

Risks of AI

Answer 11

Ethical issues

AI systems can be bias based on historical learnt data and learn prejudice.

AI systems may compromise data protection if it consent was not granted to use data.

Transparency issues when companies can’t explain how AI generated the information.

Greenhouse gas issues as some AI tech requires a lot of power.

Question 12

Considerations for auditors on AI

Answer 12

Generative AI can produce fraudulent documentation e.g invoices, emails.

Therefore, we may need more third party references and exercise professional judgement.

Additionally, consider breaches of privacy where data is used without consent. It could cause fines for e.g

Question 13

What is Cloud computing and Cloud Accounting

Answer 13

Access to computing resources such as data storage, servers and development tools via the internet.

Allows us to work remotely.

Cloud Accounting- performing Accounting tasks such as balancing accounts on an Accounting software.

Question 14

Cloud Accounting uses benefits

Answer 14

Enables remote working as data is on the internet.

Increased flexibility

Cost savings- Software often supplies maintenance and updates etc. Additionally, can rent less office space.

Access to powerful tools allowing us to analyse data

Question 15

Risks of cloud based accounting

Answer 15

May not have full control over data, cloud service provider has some, therefore the security is dependent on the Cloud service providers controls.

Question 16

Considerations of cloud based accounting

Answer 16

Need professional scepticism as we can’t just assume the cloud service provider manages key risks adequately.

The auditor will need to make special adjustments to assess controls e.g data back ups etc as it is the cloud service providers control

Question 17

What are Digital signature used for.

What most accounting systems will record.

Answer 17

Authorisation and signing off documents.

Who signed it based off signature.
When they signed it
Which computer/ IP address they signed it from.

Question 18

Considerations of digital signatures

Answer 18

Audit firms need to ensure the system is implemented properly.

The auditor must also assess the integrity of the systems and whether they are being controlled sufficienctly.

Question 19

What is meant by the control and integrity of digital Signature

Answer 19

Control refers to ensuring that only the authorised persons can access and that the signatures can’t be faked.

It also focuses on the system properly recording who signed, when and where (IP address)

Integrity focuses on the information not being tampered with after being created.