Harnessing technology for better outcomes for auditor and client

Shelley Banton realised that to take advantage of the kind of technology now streaming into the marketplace, she had to have a bigger firm behind her. Image: Anthony Geernaert.

Automation has its limits when it comes to auditing, but Shelley Banton says it's possible to harness the best of both worlds to benefit auditor and client.

At a glance

  • Shelley Banton has built a career on understanding how to use technology to do accounting and audit work more efficiently.
  • At ASF Audits, Banton’s team uses APIs to extract basic financial information like bank statements, for the SMSFs being audited.
  • Banton says that while technology can extract basic data quickly and accurately, compliance and professional scepticism are the responsibility of accountants.

These days it seems that every part of the financial services world is touting a one-stop, seamless service all wrapped up in error-less execution and packaged with jargon-free advice. It’s as if they’re telling you that the robots are nearly here, or at least they’re on their way. Don’t worry, the spruikers seem to be saying, we’re practically robots anyway – that’s how efficient we are.

It’s a philosophy creeping into the world of audit and accounting that has its dangers. Speed is everything. If you’re not ambidextrous and multitaskable as a firm, you’re not agile. Therefore, a low-cost, fast-paced product now predominates, while the less saleable virtues such as analysis and compliance get short shrift.

Shelley Banton, executive general manager, technical services at ASF Audits, has seen this coming for most of her 20-plus years in the technology/audit space. She’s been in the finance, audit and technology areas since she left university in the late 1980s and worked as a business analyst for Citibank, Perpetual and the Commonwealth Bank.

For Banton, it was always about applying technology to get the best out of the numbers. “The analytical work I did in the early 1990s was just so labour intensive,” she recalls. “I remember it took two days to retrieve data from the mainframe, populate an Excel spreadsheet and capture additional information from older files.

“You’d then have to manipulate the data yourself, and it would take a week to massage data that eventually took less than an hour to do. I decided back then that manual labour was not my thing.”

The answer was simple. “I taught myself to write macros,” she says. In the early 1990s, writing computer code was one of the things that made her job more streamlined and efficient. She was not only writing code, she was rewriting the rules.

One-click auditing

Fast-forward to 2019, and the same approach permeates her work and her thinking. She is talking now about her firm’s “one-click” auditing. Sound familiar? Another spiel from yet another firm? When Banton says ASF Audits has come up with this kind of efficiency, you give her the benefit of the doubt.

What does Banton really mean? It may sound glib that technology is part of the overall strategy when auditing self-managed super funds (SMSFs), but she reminds you that an SMSF audit requires giving equal weight to the financial audit as it does to the compliance audit. The Australian Taxation Office (ATO) has shown that it has real teeth when it comes to the standards of auditing it expects from SMSF auditors, and yet clients still demand work being done yesterday.

The team that Banton works with at ASF Audits has created application program interfaces (APIs) with the major SMSF administration software firms such as Class and BGL. This allows clients to press a button from within the software that sends all financial information to ASF Audit’s in-house audit system.

"The ATO is concerned about low-cost auditors and we also know that it creates an unlevel playing field within the audit space."
A large part of the process has involved stress-testing the veracity of data feeds, which enables ASF Audits to rely on tested feeds as the source of truth. This benefits clients because they don’t have to provide documents such as bank statements at audit time.

“Banks, platforms, wraps, brokers, other financial institutions that come through – we have already independently tested the quality of these data feeds,” Banton explains.

“It’s not that we’re getting different feeds, it’s that we have analysed them at a very high level. We’ve been able to verify a statistically significant sample of funds and feeds and now know we can fully rely on them.”

Independent evidence

Under auditing standards, independent audit evidence is needed to ensure financials are true, correct and reflect current information. “We’ve made sure that’s already embedded in the software through our data feed testing,” she explains.

The point of all this is not to say Banton’s team is the fastest, but that it allows the firm more time to conduct the most critical audit test – compliance.

“Compliance has to be human,” Banton says. “We have to put our professional scepticism hats on every time we look at a self-managed super fund. It’s that smell test that can’t be done by a robot.”

Artificial intelligence (AI) may identify that there is a trustee, and look at a trust deed, but it can’t provide you with the connection that a pension payment has been made in accordance with the deed. AI cannot yet be a sleuth. It can’t arbitrate or discriminate between transactions.

In Banton’s view, AI compliance auditing for SMSFs is many years off, possibly decades. The long-term strategy, says Banton, is to keep reminding clients that the technology isn’t the intelligence; it’s more akin to an aide for it. It cannot replace the “smell test” that sets a great auditor apart from a good one. While the software may have changed by light years since she first entered financial services, its importance remains fixed.

It’s no different to Banton writing macros back in the early 1990s to allow her more time to put more accurate thinking into the numbers and produce a better business report. Technology offers an advantage, but it’s not the crux of the work.

“SMSF auditors cannot relinquish their commitments under professional obligations to the technology. It’s extremely risky and may end up in a professional indemnity claim,” she says.

Listen: Audit’s New Frontier – How Data Analytics, Artificial Intelligence and Automation are being Integrated into External Audit

Auditors under scrutiny

If anyone needed to be reminded of the importance of the “human” compliance end of the auditing game, just look at some recent cases. The Australian Securities and Investments Commission (ASIC) this year announced that seven SMSF auditors with independence issues had been either deregistered or had a condition placed on their registration.

In most cases, it was about SMSF auditors being pinged by the regulator for auditing their own or a related party’s fund. These are the most common conflicts of interest which compromise independence and ones that technology won’t pick up, Banton notes.

“The ATO has addressed concerns surrounding independence by announcing a renewed focus on independence breaches for SMSF auditors, which include reciprocal auditing arrangements,” Banton says.

While Banton admits there has been a decrease in breaches of independence since the ATO first started reviewing in 2013, there were still 10 SMSF auditors disqualified in 2018 for not being fit and proper persons. In 2019, a further 37 SMSF auditors have been referred to ASIC.

Banton says that since SMSFs have proliferated in the past five to 10 years, a number of cut-price auditing firms have ventured on the scene, promising audits for just a few hundred dollars. Beware their promises, she says.

“Of course, if a fund has just cash and term deposits, that fee point may not be unrealistic, but if you have a A$5 million fund that has limited recourse borrowings, a number of listed and unlisted shares and/or unlisted unit trusts, how can you be doing the right thing?

“The ATO is concerned about low-cost auditors, and we also know that it creates an unlevel playing field within the audit space.”

Investing in excellence

Banton had her own firm for many years, Super Auditors, but took on the job of technical services manager at ASF Audits after a light-bulb moment. She realised that to take advantage of the kind of technology now streaming into the marketplace, she had to have a bigger firm behind her. She now looks at that decision as her finest strategic move.

“The next level of AI was something I couldn’t do on my own – I knew I needed the support of a large team that was industry recognised, had already integrated with SMSF administration software firms and was looking towards the future.

“That was part of the catalyst. On my own, I could only take it to a certain level.”

What about the cost of new technology? If ASF Audits can do a one-touch-of-the-button financial audit, will clients find themselves paying more? Will clients pay for the extra insights gleaned from these efficiencies?

Banton says not necessarily because the efficiency gains are just that – efficiency gains. “We’re not going to see a quantum leap in either accounting or auditing fees,” she says. “There are going to be increases in costs and those will be passed on to clients.

“But if you’re getting information and data more efficiently, you might be able to hold fees and still provide more value under a similar fee base.”

All the same, she says cloud-based technology takes training and testing. “It comes at an initial cost, but it is more cost effective in the long run,” she adds.

Banton's views on the future for accountants and auditors

Auditors and accountants will need to turn into analysts in the next five to 10 years. Now that everything is processed daily, they need to be able to show what business insights can be provided, what KPIs can be put in place and what business decisions can be gleaned from the accounting results.

Skills will relate to being able to look at big data and sift through information that is relevant and help business owners make better decisions. “If you see an increase in sales and variable costs, that’s OK, but what if you see an increase in sales and a reduction in costs?” she asks.

You have to see through the software discrepancies. Firms need a “software champion”, someone who is looking at what is released in the market and that can be reworked or tailored to a firm’s needs. “How do you know what software you need for what purpose?” she asks.

“You have to find software that talks to each other and that enables you to provide a complete package.” Auditors must do due diligence to ensure that they are not just accepting the benefits of technology without a complete understanding of the risks. Standards are paramount.

“We’re living in a litigious world, and we’re seeing SMSF auditors held liable for losses incurred by a fund because they didn’t do their job properly.”

Auditors need to understand how software platforms work – as they can’t do everything. Audit files need to be updated and checked to reflect the type of electronic evidence required on file to support audit findings.

Read next: Your essential SMSF auditor checklist


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