Role of Tech Firms in Audit, Already Significant, Expected to Grow

By:
Chris Gaetano
Published Date:
Feb 12, 2019
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Technology firms such as IBM are increasingly playing a significant role in the audit process, as more and more clients segment out engagements between traditional CPA firms and specialized tech companies, which can better understand the hardware and software that businesses have grown to rely upon, according to Accounting Today. The report, which was written by consulting firm Source Global Research, drew from a survey of 150 CEOs, CFOs and senior finance executives, 100 based in the United States and the remaining 50 in the United Kingdom. Of these, one third said they are already segmenting their audits into separate parts, and 44 percent are considering doing so sometime in the future.

While the audit firm would still be the one ultimately issuing the opinion on the financial statement, the engagement itself could be split between that firm and, say, IBM, which has been using its signature Watson AI to perform data analytics for business clients. Nearly half of those surveyed, 45 percent, said that this practice will mean even more work going to tech industry companies versus the more traditional audit firms, as 64 percent said they expect their reliance on outside experts to increase over the next decade. This means that there is a distinct possibility that tech firms will grow to become direct competitors for audit engagements alongside other CPA firms. 

A little more than half of poll respondents (52 percent) thought that Deloitte was best positioned among the Big Four firms to adapt to this change. Twenty-two percent thought that KPMG was best positioned, followed by Ernst & Young (18 percent) and PwC (8 percent). As for what companies they will be competing against, 40 percent of audit clients said they turn to IBM for the more technological portion of the audit, followed by Accenture at 18 percent. 

These firms are viewed as being more capable of gathering data and automating financial processes, according to the Wall Street Journal. Yet the actual analysis of this data, as well as the assurance process, are expected to remain in the hands of audit firms, as the work carries greater risk. Still, segmentation of this nature would put a dent in the number of services a client might hire a CPA firm for, opening up the field for new entrants into the competitive landscape. 

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