Minimizing Risk: Developing Internal Systems and Financial Audit IT For The Digital Belt & Road Initiative
- Dealing with audits of Digital Assets
- New Technologies require new auditing expertise
- The situation is magnified when multiplied by 140 BRI countries
Auditing is, and always has been, a complex profession. Like China’s Belt & Road Initiative, it is also changing and adapting. International businesses involved in multiple scenarios across China’s Belt & Road Initiative – with its 140 plus different countries to contend with, each with their differing statutory audit requirements – face a daunting task when trying to meld all these financial details into one coherent set of Group accounts.
Meanwhile, the processes and systems organizations used in audit continue to transform in the digital age, and new professional standards are emerging. At the same time, regulatory oversight is also expanding.
Global audit methodologies are therefore evolving to respond to this complexity, and are increasing the digitization, centralization and standardization of audit processes, as more effective ways of working are developed.
Bigger and better data collection is being combined with innovative technology, resulting in simplified processes and an opportunity to examine work through a more purposeful lens. This enables a stronger focus on risk and, in return, an increase in audit quality. Some changes are tactical, such as new audit tasks, refocused approaches to journal entry testing and the online availability of standard audit forms, templates and checklists. Other changes, however, are more strategic and require a deeper change in behavior and overall approach.
An area where simplification and innovation are working in tandem to enhance audit quality is emerging technologies. In this dynamic working world, companies are harnessing a range of such technologies in their efforts to adapt and grow. Stakeholders expect auditors to deploy the latest technology to better understand businesses and the risks they face. Leveraging emerging technologies is becoming part of the connected, data-driven audit.
For example, artificial intelligence (AI) is an increasingly important tool in the delivery of a high-quality audit. A range of tools has been developed that use AI, enabling audit teams to review business documents more effectively by leveraging machine learning technologies.
The benefits include improved speed and accuracy of reading and interpreting contracts. It is estimated that the time taken to review documents is decreased by 60%-80%, allowing audit teams to focus on judgments, higher-value activities and relationships with key stakeholders.
Another technology making an impact on audit is blockchain. As digital currencies look increasingly viable – China is currently trialing its Digital Yuan, with Russia probably to follow in mid 2021 – blockchain audit technologies will enhance the ability to perform an in-depth review of cryptocurrency (and other digital assets) within business transactions. As the role of the US dollar and SWIFT global payment networks declines in Coming years, this technology supports audits for companies that will in future be using a range of cryptocurrencies.
Asking the Right Questions
By combining the different forces impacting finance and audit, as well as the opportunities offered by disruptive technologies, newly armed audit teams are making the audit process more effective throughout each stage. The appropriate use of these new tools will enable the delivery of high-quality audits and streamline information exchange with the organizations audited at every stage of the process.
As a profession, auditors must keep questioning, analyzing and evaluating data from every perspective. Automation may relieve auditors of many time-consuming administrative or repetitive tasks, but trust in the digital age is still developed through human decisions, and the responsibility to ask the right questions remains unchanged.
The lessons to be learned then, and especially when faced with the multi-jurisdictional challenges of the Belt & Road Initiative are two-fold – the internal adoption of new, IT based solutions to the daily accounting function, and the ability for auditors to provide the necessary technologies to interpret these in an accurate, timely and useful manner.
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Silk Road Briefing is written by Dezan Shira & Associates. The firm has 28 offices throughout Asia, and assists foreign investors into the region. For strategic advisory and business intelligence issues please contact the firm at email@example.com or visit www.dezshira.com