The Hindu Business Line : A head for figures

Think of auditors and you would probably visualise scholarly individuals immersed in a sea of paper. Their work involved conducting accounting checks that meant poring over reams of paper. But with greater use of information technology, the nature of their work is changing, ever so slightly. The change is at different levels — from the mundane to the subtle.

At the most basic level, tech-savvy auditors and their assistants don’t have to flex their muscles to lift mountainous ledgers. S. Balasubramaniam, Chartered Accountant, puts it succinctly, “Everything, from preparation of basic financial statements to reports, is done on the system. My apprentices don’t like to write on paper.” Paperless office is not that distant a dream in audit offices as it used to be.

P.S.Kumar, Partner, Brahmayya & Co, feels the audit profession has benefited like the rest of the world through gadgets and technical devices such as laptops, computers, cell-phones and blackberrys. Acknowledging the higher stakes in the business now than 10 years ago, he says, “The ante has been upped, as it were. The work load has gone up manifold. And there are now more accounting standards and new concepts to deal with, requiring capturing of information that is not possible without a strong IT support.”

According to Ashesh Jani, Partner, Deloitte Haskins & Sells, “The cost, in relation to the time spent in executing an audit assignment. has certainly come down. However, the initial capital cost of equipment (the second highest cost in a CA’s office other than people) remains high.”

He points out that the efficiency of an auditor has increased tremendously due to the change in available technology. “The speed at which audit jobs can be turned around cannot be compared with the speed of audits done earlier. This also means that auditors can take in more work and that means greater demands on the time of seniors and audit field staff.”

‘Almost entirely electronic’

According to Sai Venkatesh, Partner-Assurance, Grant Thornton, “Audit documentation is today almost entirely electronic for many firms. This enables quicker reviews, better access, archival and retrieval of information.

From a time when one had to read through a 2,000-page manual to find guidance on a particular issue, today, searchable databases and online resources are available, which permit access to the same information in a matter of a few minutes. Today, accounting guidance, company law, other regulations, etc, are all available in electronic form, which makes them very convenient to us. Besides, auditors do not need to be physically in one room to complete an audit. Most of the large accounting firms have their own audit software, which facilitates a smooth audit process.”

Kumar lists areas where IT has made a significant difference in audit practice.

He says, “IT has made a huge impact in databases, communication, corporate filings and new techniques.

1. Databases: Many top audit firms now have access to online and offline data bases — that capture a huge amount of industry information. A case in point is the database we use for transfer pricing assessments and inter-firm comparisons. It is unthinkable whether this would have been possible without technology.

2. Communication: If you take the facility of conference calling, it has helped us deal with so many parties without the need for travelling. In some cases, we are able to provide a daily briefing to clients in different parts of the globe. We are also able to work offsite on several engagements involving foreign companies with access provided to their servers for downloading information. You can view a foreign company’s books of account and other information.

3. Corporate filings: Another area is the access to corporate filings that are available in the public domain. SEBI requires all listed companies to file their filings in EDIFAR, which is modelled after the EDGAR of SEC. There is a huge wealth of knowledge available which is there for the asking at no cost. This gives one a complete picture of contemporary practices and trends.

4. XBRL: And potentially one of the most exciting areas is the XBRL (Xtensible Business Reporting Language). All corporate filings are filed in HTML or other machine languages that one can download but cannot manipulate.

XBRL removes that difficulty so that any filing can be changed to one’s convenience (such as an excel worksheet). In course of time, when XBRL is widely available (some companies such as Microsoft are already doing it), a reader can do his own analysis with the data made available, juxtapose data from other corporate filings from peer groups and do meaningful research.”

At the same time, IT has not been a panacea for all problems, observes Kumar.

He says, “The audit process time has not really come down, although the old problems of having to tally trial balance and the like have largely disappeared. But when you use technology, you must be able to do something in lesser time than before. It should help you become more efficient. Perhaps that happens in high-end audits involving ERP (Enterprise Resource Planning) and computer-aided audit techniques.

But this is something that is done only in the top 10 per cent of the companies. The rest follow the traditional methods of working around the computer rather than working through it.”

vageesh@thehindu.co.in