The Future of Audit in Light of Technological Changes: Opportunities and Threats

The Future of Audit in Light of Technological Changes: Opportunities and Threats

Sanja Sever Mališ, Lajoš Žager, Mateja Brozović
Copyright: © 2021 |Pages: 22
DOI: 10.4018/978-1-7998-4390-0.ch012
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Abstract

External audit of financial statements plays a key role in achieving transparent financial reporting, since its purpose is to provide reasonable assurance that the presented financial statements are free of material misstatements due to fraud or error. In the process of fulfilling this role, auditors must be adaptable, especially when it comes to technological advancements. This chapter explains the effect that new technologies have on audit of financial statements. In addition to summarizing the technological changes that impacted the audit profession in the past and therefore introduced new generations of audit, the authors have identified issues and challenges in the way the audit is currently performed. Some of the new technologies that are discussed in this chapter have the potential to mitigate these issues. However, new challenges and risks may be introduced with accepting these technologies in the process of financial reporting and auditing.
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Importance Of Audit Of Financial Statements

Information disclosure and financial transparency can be highlighted as one of the most important corporate governance mechanisms. Due to possible conflict of interest and opportunistic behavior of management responsible for financial statements, different forms of financial reporting control or supervision are required in order to enhance the credibility of the financial information presented. Therefore, the importance of auditing is also emphasized within the OECD Corporate Governance Principles, stating that an annual audit should be conducted by an independent, professional and qualified auditor in line with quality audit standards, with the purpose of providing external and objective assurance to management and other stakeholders regarding financial position and performance of the company in all material aspects (Organisation for Economic Co-operation and Development – OECD, 2015). It can be concluded that the audit of financial statements has evolved out of a need to protect the interests of financial statements users who use the information presented for business decision making.

Key Terms in this Chapter

Audit Risk: Risk that the auditor expresses an unmodified opinion regarding financial statements that are materially incorrect.

Artificial Intelligence: Use of intelligent devices designed to work and respond in a human way.

Data Analytics: Technique of analyzing so-called raw data to generate useful information.

Blockchain: Digitized public ledger of transactions between various participants in the network.

Audit of Financial Statements: The process of obtaining evidence that the financial statements are presented in accordance with the defined criteria and provides information about the level of compliance to interested users.

Reasonable Assurance: A high level (but not absolute) of assurance that the financial statements are not materially misstated.

Computer-Assisted Audit Techniques and Tools: Techniques and tools that involve the use of technology in the audit process.

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