By Bjorn Biel M. Beltran, Special Features Writer
For many businesses, technology in the digital age is the great leveler. Across all industries, disruptors from digital natives and tech-savvy entrepreneurs are changing the landscape of how business is done. Many companies have found incredible growth seizing opportunities that have come up in the commotion, and the auditing industry in the Philippines is no different.
As the Philippine development story continues to unfold, the rising tide brought in by investments has created a dynamic environment for local auditors. Sharon G. Dayoan, chairman and chief executive officer of KPMG R.G. Manabat & Co., told BusinessWorld in an e-mail that with digital innovation speeding ahead, the prospects of the entire industry looks bright.
“Technology plays a vital role in today’s audit profession. Like other countries in Asia, the auditing industry in the Philippines is constantly innovating to stay competitive and better serve the capital markets and the society,” Ms. Dayoan said.
She added, “Technology has constantly been transforming the way we do business. Any successful transformation starts with a clear strategy grounded in an understanding of emerging trends. At KPMG, we track these changes and analyze their potential impact — both to help our clients and guide our own innovation investment strategy. Among the trends that shape the industry are digital transformation, talent and work force development, customer experience, Data and Analytics (D&A), Robotics Process Automation (RPA), Artificial Intelligence (AI) and the productivity landscape, Blockchain, Fifth Generation (5G) and Quantum computing.”
The potentials of data
Technology has expanded the frontiers of what is possible. Cognitive technology, otherwise known as AI, for instance, can scan through vast stores of data and perform digital analysis of this data in a way that is humanly impossible. AI uses algorithms that enable software to absorb relevant information, reason, and come up with conclusion that is useable by humans.
Data, as they say, is the new gold, and with the proper implementation of cognitive technology and the process known as machine learning, computers can course correct and try new strategies as they encounter obstacles or changes in variables in their work.
In the field of auditing, where data is abundant, computers can expedite processes and find the best courses of action more effectively and more efficiently than any human can. This would allow auditors to use technology to conduct analyses of structured and unstructured data from non-traditional sources such as social media or the Internet in ways not possible just a few years ago.
“Auditors can then use this analysis to deliver high-quality audits that dig deeper into the data and reveal more about a company, its risks, its financial reporting controls and its operating environment,” Brian Foster, KPMG’s U.S. Emerging Audit Solutions Leader, said in a Forbes Insights/KPMG report “Audit 2025” published in 2018.
“The bottom line is that cognitive technology will empower and enable our professionals to make key judgments and deliver high-quality audits in a world of exploding data and ubiquitous information, and provide our auditors with access to richer, more detailed audit evidence and valuable insight that we can use to differentiate our service proposition,” Mr. Foster said.
In addition to streamlining and restructuring financial data, technology is also providing new ways to make informed predictions about the future. Predictive analytics involves using advanced data analysis techniques to make predictions — based on probabilities — about the future and may involve advanced technologies such as artificial intelligence and machine learning to refine those predictions.
According to the report, in the context of high-quality audit, auditors can employ digital tools to extract information from an organization’s systems, and then use predictive analytics for the purpose of identifying patterns that either align or don’t align with anticipated outcomes and trends. Such a strategy is especially useful in gaining deeper insight into a client’s business and the financial risks it takes during the course of a year.
More specifically, client data in combination with locally-gathered industry or market data can provide auditors a deeper and more robust understanding of the state of the business and any risks. For instance, external auditors working with a client can use predictive analytics to assess whether the client’s financial or other data conform to the expected norms for comparable historical data from both within the company as well as from companies in comparable circumstances. As this capability comes into wider use, auditors will have a powerful tool to grasp the accuracy of reported information and promote audit quality — with comparative data as a benchmark.
“Advances in technology and an explosion of data have changed the game. Digital disruption offers the potential to reinvent how we do our audit. With the latest innovations in audit technology, automation and data analysis have been leveraged to make better decisions, provide greater insights, and enhance audit quality through the analysis of greater quantities of data. Auditors, in turn, provide more robust audit opinions and actionable insights delivered seamlessly through an integrated platform,” Ms. Dayoan said.
Opportunities of tomorrow
For the Philippines, this presents both a challenge and an opportunity. Companies at the cutting edge of innovation can leverage on these emerging technologies to improve audit quality. Ms. Dayoan said it aims to do this by staying ahead of the curve on evolving technology, changing regulatory environment, and shaping people to become the Workforce of The Future.
For others, however, the changing landscape is a continuous struggle to catch up with leading trends to maintain relevance in a digital world.
“Accounting firms need to connect with the current theme such as big data, and drive that same elevated interest. Accounting needs to be seen as more forward-looking, futuristic and high-tech to capture the interest and imagination of young people,” Ms. Dayoan said.
She added, “The local market should embrace technology as a driver of growth and ensure that their people are equipped with the skills needed to deal with this new technological reality. Most organizations are still struggling to deploy AI at scale. But over time, AI could reshape the productivity landscape, which has been characterized by slow growth across many developed economies.”
A paradigm shift is in the process, and many businesses stand to lose everything should they fail to adapt and overcome the myriad challenges brought about by technology. At a time when the Philippines is slowly making its mark on the world stage in terms of economic development, there has never been a more critical time.
“We have entered a new era where we talk about digital and data, an era where collective thinking, technology-based function and fast-paced learning are prevalent. We need to be agile enough to keep up with the changes to increase efficiency and continue to deliver excellent service to our clients,” Ms. Dayoan said.
She added, “We see the industry embracing data science and investing in emerging technologies like D&A and AI but above all, investing in the workforce to build and enhance the professionals’ capabilities. These changes stand to reason that our audit technology and our capabilities need to continuously evolve.”