AUDIT IN DIGITAL AGE

Literature Review

The digitalization of business processes has led to a rise in complexity in auditing, necessitating adaptability to new opportunities and difficulties brought about by digital technologies. The goal of this assessment of the literature is to pinpoint the key issues, possibilities, and trends related to auditing in the contemporary digital environment.

The aim of the literature review is to assess recent studies and writings concerning the impact of digital technologies on auditing methodologies and the strategies auditors employ to address emerging obstacles amid the digital transformation era.

The influence of digital technologies on auditing methodologies suggests a substantial shift in how audits are carried out, with tools like data analytics, artificial intelligence, and cloud solutions playing pivotal roles. This necessitates auditors to acquire fresh skills and acclimate themselves to emerging technologies.

The obstacles and hazards associated with the digitalization of auditing encompass a range of difficulties encountered by auditors in relation to digital technologies. These include concerns over cybersecurity vulnerabilities, the intricacies of handling extensive datasets, and the imperative to adhere to ethical norms.

The benefits of digital innovation in auditing point to the potential benefits of using digital technologies in auditing, such as increased efficiency, improved audit quality, and enhanced data analysis capabilities.

Additionally, in the development of professional competencies, the need for the development of professional competencies of auditors in the field of digital technologies is discussed, including the ability to work with data, understanding cybersecurity and skills in using modern audit tools.

A review of the literature highlights the main trends and problems in the field of auditing in the digital age. In addition to highlighting the necessity for auditors to adjust to new technology, its also draws attention to the possible advantages of digital transformation for auditing practices.

Introduction

With the advent of the digital age, significant transformations are taking place in the essence of auditing.[1] Traditional methods of verification and control, combined with advanced technological developments, open up new horizons for auditors, but at the same time new challenges arise that require adaptation and innovation.

Understanding the impact of digital technologies on auditing is of key importance for all stakeholders: from companies ordering audit services to auditors themselves and regulators overseeing compliance with standards and ethical standards in the field of financial reporting.

The transition to digital technologies is causing a revolution in the processes of auditing and resource use. Processes that previously required considerable manual effort are now automated thanks to robotics and artificial intelligence. This reduces the time required to complete tasks and improves the accuracy of the audit.

Automation and Robotization in Audit

Automation and robotization in auditing are key tools for optimizing verification and control processes. In the digital age, where data is playing an increasingly important role, the use of automated systems can significantly speed up and improve the quality of audit work.[2]

Advantages of automation and robotization in audit:

Automated systems allow you to perform routine tasks such as data collection, checking financial statements and analyzing financial transactions much faster and more accurately than a human can do. This reduces the time spent on conducting audit procedures, which leads to savings for both auditors and clients. Robotic systems have greater accuracy and reliability, which reduces the likelihood of errors and improves the quality of the audit. Automation also makes it easier to scale audit processes, especially when dealing with large amounts of data and multiple clients. In addition, the introduction of automated audit systems helps to reduce operating costs, as the need for a large number of human resources decreases.[3]

An example of successful implementation of automation and robotization in audit: The large audit firm "Audience of the 21st Century" has implemented AuditXP Professional software for automation and optimization of audit processes. This system provides a wide range of tools, including automation of data collection and analysis, robotic processes for checking financial statements and integration with business intelligence systems. This has led to an increase in customer confidence and a strengthening of the company's position in the audit services market.

Figure 1. AuditXP Professional, monitor barrier performance

Big Data and Analytics

In the digital age, where data plays a key role in strategic decision-making, Big Data and analytics are becoming an integral part of auditing practice.[4] By analyzing large amounts of data, auditors can identify new trends, identify risks and opportunities, and predict future changes.

Figure 2. The ways how to identify new trends

The benefits of using big data and analytics in auditing:

The use of big data and analytics in auditing provides a number of advantages. In-depth analysis, which allows auditors to analyze information from a broader perspective, identifying hidden patterns that may affect the financial condition of the company. Data analytics helps to detect anomalies in financial data and operational processes, helping to identify potential cases of fraud or errors. Big data analysis allows auditors to predict future trends and changes in the market, helping companies make more informed strategic decisions. In addition, identifying new trends with the help of analytics allows you to optimize the company's costs and resources, directing them to where they will be most effective.

Cybersecurity and Auditing: Striving for Security

In the modern digital age, where cyber threats are becoming increasingly dangerous, ensuring data protection is becoming a key task for companies in all industries.[5] The role of auditors in this process is invaluable: they analyze security systems and assess the level of data protection for their customers.

Auditors analyze companies' security systems, help prevent cyber attacks and protect data from unauthorized access or hacking. Auditors analyze vulnerabilities in clients' information systems, identifying potential threats and recommending measures to eliminate them. They help companies comply with legal requirements in the field of cybersecurity, which avoids fines and negative impact on reputation. By providing a high level of data protection, auditors help to increase the trust of customers and partners in the company, which can become a competitive advantage in the market.

An example of using security standards in an audit:

The Open Web Application Security Project (OWASP) is an organization whose goal is to improve the security of web applications.[6] The Online Security auditing firm has integrated OWASP recommendations and standards into its audit processes. Thanks to this, the company was able to improve the quality of its audits by identifying vulnerabilities and recommending appropriate measures to eliminate them. This approach has not only increased the level of data protection for customers, but also strengthened the company's position in the audit services market, confirming its competence and professionalism in the field of cybersecurity.

Figure 3. The OWASP vulnerability rating

Cloud Technologies and their role in Auditing: Flexibility and Accessibility

In today's business world, cloud technologies are important, providing flexibility, accessibility and efficiency in data storage and processing.[7] For auditors, the use of cloud technologies presents new prospects for conducting audits and ensuring a high level of professionalism in their work.

Figure 4. The type of cloud platforms are examples of the application

Ethics and Auditing in the Digital World

In the digital world, ethics and auditing play an important role in ensuring compliance with norms and standards.[8] They not only provide data protection, but also maintain user trust in digital services and products.

An example is compliance with the GDPR (General Data Protection Regulation) standards in the European Union. This regulation sets strict requirements for the processing and protection of personal data of EU citizens. Companies that collect and process user data are required to comply with a number of principles, such as consent to data processing, data security and notification of incidents in the event of information leakage.

In this case, auditors play a key role in verifying companies' compliance with GDP requirements. They analyze information systems, data processing processes, and security policies to ensure that companies act in accordance with GDPR norms and standards.

Ethics also plays an important role in the digital world, especially in the context of data usage. Companies must be ethical in handling user data, respecting their confidentiality and taking into account their interests in processing information.

Regulatory Requirements and Standards

Regulatory requirements and standards play a key role in ensuring data security and protection in the digital world. Compliance with these rules is a prerequisite for users' confidence in the protection of their confidential information.

Another important standard is ISO/IEC 27001, which defines the requirements for an information security management system (ISMS). This standard provides companies with methods and practices for effective information security management, including threat assessment, risk assessment and implementation of appropriate control measures. Some of the applications are:

• Privacy Management Software: These applications help companies manage the process of complying with GDPR and other legal requirements for data protection. Examples include: One Trust, Trust Arc, and PrivacyPerfect. [9]
• Information Security Risk Management Tools: These applications help companies assess information security risks and take measures to reduce them. The applications can be: Archer, IBM Security QRadar, and Symantec Control Compliance Suite.
• Access Control Tools: They help companies control access to sensitive information and ensure compliance with security standards: Okta, Microsoft Azure Active Directory, and Ping Identity.
• Security Monitoring Tools: Mostly provide the ability to continuously monitor information systems and detect abnormal behavior. Splunk, SIEM (Event Management and Information Security Systems) and Cisco Stealthwatch are the usable programs.

Training and Development of Personnel

In the digital age, auditors need to constantly improve their skills and knowledge through training and staff development. This is especially important in the context of a rapidly changing technological landscape and business processes. Training and staff development allow auditors to master new methods and tools related to data analysis, cybersecurity, automation and the use of cloud technologies.

Continuous improvement helps auditors keep up with the latest trends in auditing and technology, which allows them to respond effectively to changes and improve the quality of their work. The training also contributes to the development of leadership qualities and skills necessary for the successful management of audit projects and teams.

Figure 5. One of the top audit automation tools- SAP Audit Management

The role of Artificial Intelligence

Artificial intelligence (AI) in auditing opens up new possibilities for more accurate and efficient audits.[10] By automating repetitive processes like data collecting and analysis, artificial intelligence (AI) in auditing frees up auditors' time resources for more in-depth analysis and strategic decision-making.

The ability to analyze vast volumes of data is one of AI's primary features. Furthermore, compared to a human, it can process and analyze enormous amounts of data far more quickly and precisely. This enhances the audit's quality and helps clients uncover possible risks and opportunities by enabling us to find hidden patterns in the data in addition to anomalies.

Furthermore, it has the ability to automate audit procedures like risk assessment, fraud detection, and financial statement verification. As a result, you may decrease the amount of time needed to finish jobs and the chance of errors, which eventually improves the efficiency of audit work.

Strategic Planning and the Future of Auditing: Flexibility and Innovation

To effectively adjust to a company environment that is changing quickly and technology advancements, strategic planning and the future of auditing are striving for flexibility and creativity. When an auditor is flexible, they can adjust to changes in the external environment of the organization and respond to new requirements and obstacles that may occur during the audit process. Consequently, innovations offer fresh approaches and resources to enhance audit procedures, boost output, and cut down on work completion times.

Machine learning algorithms, for instance, can be used to examine vast volumes of data and spot irregularities or possible threats in a company's financial reports. This makes it possible for auditors to evaluate the company's financial situation more precisely and successfully, which helps them make better judgments.

Figure 6. The application of artificial intelligence (AI) techniques to audits

Digital Audit Program

The Digital Audit program, which equips auditors with the information, abilities, and resources they need to operate in the digital era, is crucial to the auditing industry's future. In order to properly execute audit procedures and activities, this curriculum covers a variety of digital technologies, cybersecurity, data analytics, and automation topics.

Training auditors to apply contemporary analytical tools and technologies, like artificial intelligence and machine learning, is one of the program's main components. This enables them to efficiently evaluate vast volumes of data, spot trends and abnormalities, and base judgments on the knowledge gathered.

Conclusion

Regulatory authorities and auditing standards are actively adapting to changes in the technological and business environment, which underlines the importance of constantly updating the knowledge and skills of auditors. Staff training and professional development are becoming an integral part of a successful audit approach in the digital age.

Although auditors face a number of obstacles, digital technologies also offer them unique opportunities to improve and enhance audit processes. The use of robotics, artificial intelligence and data analysis allows auditors to carry out their work more efficiently and in detail.

In general, auditing in the digital age is a complex combination of new opportunities and challenges. Only those auditors who can flexibly adapt to a rapidly changing environment, strive for continuous learning and innovation, will be able to successfully overcome all difficulties and ensure the high quality of their work in the modern world of business and technology.

References:

1. Bamberger, Kenneth A. "Technologies of compliance: Risk and regulation in a digital age." Tex. L. Rev. 88 (2009): 669.
2. Gotthardt, Max, et al. "Current state and challenges in the implementation of smart robotic process automation in accounting and auditing." ACRN Journal of Finance and Risk Perspectives (2020).
3. Lacurezeanu, Ramona, Adriana Tiron-Tudor, and Vasile Paul Bresfelean. "Robotic process automation in audit and accounting." Audit Financiar 18.4 (2020): 752-770.
4. Gepp, Adrian, et al. "Big data techniques in auditing research and practice: Current trends and future opportunities." Journal of Accounting Literature 40.1 (2018): 102-115.
5. Kaplan, James M., et al. Beyond cybersecurity: protecting your digital business. John Wiley & Sons, 2015.
6. Lala, Shubham Kumar, Akshat Kumar, and T. Subbulakshmi. "Secure web development using owasp guidelines." 2021 5th International Conference on Intelligent Computing and Control Systems (ICICCS). IEEE, 2021.
7. Avram, Maricela-Georgiana. "Advantages and challenges of adopting cloud computing from an enterprise perspective." Procedia Technology 12 (2014): 529-534.
8. Munoko, Ivy, Helen L. Brown-Liburd, and Miklos Vasarhelyi. "The ethical implications of using artificial intelligence in auditing." Journal of business ethics 167.2 (2020): 209-234.
9. Torre, Damiano, et al. "Modeling data protection and privacy: application and experience with GDPR." Software and Systems Modeling 20 (2021): 2071-2087.
10. Issa, Hussein, Ting Sun, and Miklos A. Vasarhelyi. "Research ideas for artificial intelligence in auditing: The formalization of audit and workforce supplementation." Journal of emerging technologies in accounting 13.2 (2016): 1-20.