Financial Auditing Assignment Help
1. Assurance and Financial Statement Auditing
2. Risk Assessment
3. Auditing the Revenue Process
4. Auditing the Human Resource Management Process
5. Auditing the Financing
6. Professional Conduct, Independence, and Quality Control
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The relevance of financial auditing lies in context to verifying the financial statement in accordance to specified criteria. According to González-Díaz & García-Fernández (2016), financial auditing is considered as one of the independent evaluation of organization in conjunction to finance reporting as well as financial statement processing. The key stakeholders involved in this procedure include investors, managers, regulators, and human resource department, to home it should be assured that the financial statements are complete and accurate with reference to all requirements of the organization.
Scope of this report
The importance of audit process mainly lies in accuracy of the statement and report, which in turn will be useful for decision-making process. In recent years, the advancement of technologies brings new concept of information technology, data management, and use of computers into these processes. Thus, the integration of financial and technological terms give rise to a new concept called “FinTech”. In the present report, the focus is based on analysis of the impact next on auditing process, by the introduction of FinTech.
In the preceding sections, first we will discuss about FinTech and its implications as well as the contemporary auditing process and include discussion of technological application in the auditing process. This will include the analysis of positive effects, how public and private sectors are implementing changes, the associated challenges, there mitigation strategies, and the future perspectives.
Contemporary auditing process
Auditing process is as old as accounting. The primary intention of this process is to detect and prevent error. Auditing mainly evolves after the industrial revolution, where the company owners and management becomes separate entities. Hence, the stakeholders put forward a requirement of independent report on accounting, managed by board of directors who were the actual employees. Further with the increase in size of company and functionalities, the corresponding volume of transaction increases. As a result of which the arithmetic accuracy as well as fair representation of financial effort become a key requirement. Ultimately it leads to development of agency called international accounting standards committee, accounting standards board, institute of chartered accountants, who are responsible for developing practice guidelines for accountants and auditors (McKinney, 2015). Furthermore the inclusion of technological standards bring computers into the process of auditing.
FinTech tends to improve the operation and organizational engagement capability. This is managed by implementation of digital innovation, big data analytics, leveraging analytics, and efficient data management. According to Hussain et al. (2019), FinTech is considered as a new origin, which have potential to affect all the areas related to international financial service industry. some of the common utility application of FinTech in auditing process can be accounted weight financial service experience that helps banking and fund management industries to operate their activities, technology experience which brings new services and solutions with a digital innovation, regulatory technology and medical technologies to identify dissolution of accounting, and actionable data management such as analytics, cash flow, and liquidity management.
Impact of FinTech on the contemporary auditing process
The utility benefit of FinTech implementation in the auditing process mainly exist with reference to offering opportunity for open communication planning process. FinTech provide seamless connectivity between audit team and auditee, which in turn avoid the delay of response and corrective measures. In addition to this, it also offers benefit to stakeholders by mapping the risk which are prone to the organization, functionality, or processes. As a result of which the principal focus remains on updating data clear to the fieldwork, identifying anomalies, and help seen optimizing the sample selections. According to Gai, Qiu & Sun (2018), the advantage that is gained by FinTech in the auditing procedure includes:
- Reduction in the field-time for data processing.
- Increase the opportunity to focus on in-depth and significant issues.
- Increase in number of process improvement as well as accuracy of financial statements.
- Reduction of fraudulent, error, and anomalies in the financial statements.
- Improved credibility and transparency in data processing.
- Improves the relationship with corresponding stakeholders.
The acceptance of FinTech in the auditing process is mainly based on its advantages that helps in avoiding error and fraudulent factors. For example the positive effect of FinTech application in transaction-related audit in process can be accounted as:
- Offer authorized, legal proceedings and cross-check for fraudulent activities.
- Preserve the data in conjunction to transaction executed between related parties.
- Off-chain data management, which is linked to side agreement of any organization.
- Proper classification of elements included in financial statement.
- Enables the user to include journal entries, supporting spreadsheet, account reconciliations, and trial balances, for the overall auditing process.
In addition to this, the utility of information technology and computer powers also enable to record all the transactions within the financial statement; that reflect estimated values and correlate them with the historical cost. As a result of which, the report prepared for the stakeholders remain accurate and ready to be used for decision-making purpose. Additionally, the benefits of FinTech application in auditing process as dictated by Kumar et al. (2018) includes, increase the transparency, accurate tracking, effective cost reduction solution, and permanent ledger.
How organisations manages change
The introduction of FinTech for auditing process also forces the organization to implement change in the overall procedure. Although, the objective is to achieve efficiency and minimize the error in auditing procedure; the change of management itself brings conflict. The responsible factors include resistance of employees to learn, conflict between different protocols and templates, learning new system that include computers.
The change of management in both public and private sectors primarily aims the auditors, which is a continuous process of adapting. The motivation include changing customers requirement with leveraging digital procedures, for example, cloud network, social network, Big Data, mobile service and advanced business models (Morozov, Gubina, & Kotelyanets, 2018). Ultimately this initiate the requirement to deliver the data value proposition efficiently. Hence, it requires an automated procedure that should be straightforward, error-free, and streamline procedure to synchronize all type of transactions.
The effect of FinTech on the auditing process within organization can also be understood with respect to its pros and cons for implementing changes. These include the following points (Kursh & Gold, 2016):
- The older system for auditing were not removed, and hence if the implementation goes wrong employees can revert to the old auditing process.
- Pilot-scale implementation exposes the strength and we carry has to learn new applications; and thus it provides opportunity to learn.
- Majority of developing nations “do not force” for the change required for auditing process. Hence it exerts a low demand of management for investing political capital.
- If the previous systems were not removed the maintenance team required service proliferation for twice of the system.
- The multiple choice of system for auditors also introduced inconsistency to the client experience.
- Lack of proper opportunity to learn systematically, however this also leads to delay in implementing new application of FinTech for auditing.
Challenges and barriers
The key challenge that is associated with utility application of FinTech is that the auditors have to understand the functionality and associated modules, in order to prepare a report accurately. Furthermore, the protocol adapted for the auditing process requirements to be uniform across all the parties involved (Jung & Park, 2016). This is essential in order to maintain uniformity as well as acceptance by all professionals in world in the procedure. For international financial procedures, it also become important for the auditors to evaluate policies and liabilities related to digital assets. Thus, the acceptable accounting principles can only become uniform across the parties only if the national financial reporting standards where were adopted.
According to the report of Garaschenko, Nasonov & Leonov (2018), following factors can be attributed as barrier for FinTech implementation into auditing procedures:
- The regulatory environment, which critical protects the format, procedures of auditing and review, and authorization for financial statements.
- Funding option is another barrier that delays the implementation of FinTech in low to medium capital firms.
- Technological constraint is considered as one of the major challenge for implementing universal FinTech applicability.
- Another challenge exist in framing trustworthy and loyal relationship across digital platform. This serves as resistance for medium-to-large sized entertainers that uses domestic and international financial transactions, against using uniform format for auditing procedures.
Risk mitigation strategies
The objective of risk mitigation strategy is to clearly identify the outlier and exceptions that hinders the implementation of using technological measures in the auditing procedures. In particular the mitigation strategies to overcome technological constraint is to educate and motivate older employees for updating their competency regarding computer usage (Lee, Yen, & Hurlburt, 2018). The challenges with respect to technological constraint comprises of two prospects oh, the first one is finding suitable technology and platform with reference to the resource available in different part of world. Such constraint can be overcome by using a uniform format of auditing procedure, single template and synchronization between different sources of financial data. On the other hand, another constraint is related to the human factor. This refers to the difficulty and constraint employees the shift from contemporary auditing procedures to the newer one which make uses of computers and software (Kursh & Gold, 2016).
The implementation of FinTech in the auditing process mainly aims to increase the effectiveness and reduce the error. With the worldwide increase the acceptance of FinTech for the auditing purpose, the interpreters facilitating FinTech services are now focusing on artificial intelligence technology (Leong & Sung, 2018). The future perspectives of artificial intelligence enables analysis of full population data, interlinked data mining, sentiment analysis, and obtaining data from speech and image recognition. In addition to this the artificial intelligence not only helps in streamlining the auditing process, but also helps in protecting and securing the data. For instance machine learning codes can automatise the entry of accounts thereby improving the fraud detection procedure. Likewise the audit procedure can also be transformed with the deep learning such as analysing the unstructured data from email, social media, internet blogs, and conference calls (Gai et al., 2018). Hence, the future of auditing procedure is it believed to have significant opportunities to streamline procedure and accurate statements.
In summary, the present report describes the contemporary auditing procedures and the corresponding impact on these procedures by using FinTech. It is a well-known fact that auditing procedures are of high interest to the stakeholders, where they require clear, accurate, and error free information for making decisions. FinTech offered the opportunity to use information technology and computer software for the synchronization of data, confirming validity, and using accurate template for financial statements. The present report describes the positive impact as well as existing challenges for global implementation of FinTech in the auditing procedure. Additionally, the risk mitigation strategies as well as the future perspective of FinTech were also included in this report. Overall, it is believed that the information contained herein will be beneficial for auditors, scholars as well as general community to understand the impact of FinTech on the auditing procedure.
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