The world of auditing may seem to anyone that is not a “bean counter” to be dry and without imaginative space. Certainly, the auditing profession requires rigidity of thought and attention to detail – abilities that definitely enhance creativity! Throw in the vast possibilities of technology and there could be very exciting things in the future of this profession which is so critical to financial services. This week’s column imagines one such possibility, and what its impact could be upon curbing fraudulent activities.
Corruption and greed not only create poverty and widens the divide of income between the have and the have-nots, but it facilitates the continuity of inefficiencies and unproductive work ethics. When it persists at all levels of the economy both private and public, it morphs into a terminal disease. Audit is not designed to detect fraud because it reports on the past and is heavily dependent on management’s integrity. What if technology could change all of this with real-time processing and integrated auditing (like an internal auditor but governed by an external auditor)? What if the audit process could alert and detect abnormalities as soon as it happens, thereby reducing the environment to facilitate fraud?
The role of the auditor would certainly change from looking back to helping shape the future. The auditor will more look like a technology consultant than a “bean counter”. Using artificial intelligence (AI), data analytics and the internet of things the auditor could get alerts that can be interrogated, focusing on abnormalities rather than transactional data. What if every company and state-enterprise general ledger could be integrated into a common data platform where transactions are reviewed as performed?
Auditors can ask questions at the time a transaction occurs and use this to also rate the financial management and integrity of clients’ financial reporting. This could then give more real-time information to investors and reduce anyone benefiting from insider information, thus levelling the playing field.
The system would be supplemented by a centralised procurement system where AI and data analytics could compare procurement prices immediately. It will allow all procurement to use one database with access like a centralised KYC (know your customer) blockchain, thus ensuring ensure the validity and integrity of the data. The database will also house information on all contractors and suppliers linking connections, bids won and lost, reviews on budgets and deadlines and KPIs for products. All citizens will have access to every public bid and all contractor payments managed through the blockchain, enabling funds to be traced instantly. The system would, in effect, be like a real time check on all procurement, enabling auction systems to work with real-time reporting and transparency. Then it could be linked to tax records which would immediately compare if taxes are being paid and recording the value of the job to then reconcile with tax returns.
Not only would it create a less corrupt country, but the government would be able to ensure that all taxes are reported and collected before accepting a bid. We the citizens could then trust that our tax payments are being captured and used with integrity.
While we already have ways that technology is being applied for the actual delivery of services, it just might be the right time to embrace a vision to disrupt the role of auditing and enterprise risk services and re-introduce integrity into our systems As we work towards 2030 Sustainable Development Goals, think of the powerful impact of harnessing technology in the fight against corruption and to eliminate inequity and poverty.
It might not be as far-fetched as you think – if only we could automate the human will.
The TT Chamber of Industry and Commerce thanks Maria Daniel, Lead Partner, Strategy and Transactions (Trinidad), EY Caribbean for contributing this article.