Rapid, fundamental changes are sweeping the finance function – with the pace and direction primarily set by digitalisation. But that is not all. The challenges faced by CFOs vary from sector to sector. In industry and commerce it is cost pressure and improving business performance; for banks and insurance companies it is also compliance and the heterogeneity of IT. This is a journey the digital auditor (Auditor 4.0) is wise to undertake hand in hand with the CFO. By joining forces, they can make a great contribution to value creation.

The finance function is the nerve centre of an organisation. It is where data from most corporate functions come together for quantitative analysis. Ideally, it also provides strategic impetus, serving as an internal control organ with a direct influence on the performance of the business. The auditors verify the relevant data and information in the form of accounts and consolidated financial statements.

Hand in hand

Today’s chief financial officer (CFO) faces many challenges. Data quality and security are gaining in importance along with fact-based decision-making. Management expects transactions to be processed more cheaply and quickly. Besides assuring efficiency and quality, the CFO has to serve as an “internal” consultant adding value to the business and building the corresponding data analytics capabilities within his or her team. This enables them to upgrade the growing volumes of available data into information that facilitates decisions and increases the value of the business. A value-driven approach like this enables CFOs to help CEOs improve the performance of their organisation. CFOs of banks and insurance companies also have to contend with new regulations and tighter transparency requirements and address the challenge of harmonising what are often heterogeneous system landscapes.

Given the number of tasks involved, the question inevitably arises as to where the finance function will be in five years, and what, ideally, it is going to look like. Rapid technological change is transforming the way both CFOs and auditors operate. There are many parallels and dependencies between the way their work is developing.

The digital auditor (Auditor 4.0) has access to industry-specific toolboxes. From these they choose the appropriate algorithms for their clients. There are two main aims behind technology-driven audit tools:

• Gaining insights that will help the client 
• Enhancing audit certainty and efficiency

The extent to which the auditor can use new technologies is determined by the available data, ERP systems, applications and processes within the organisation they are auditing.

Auditors can use their insights to work closely with the CFO to help the company accelerate and steer the process of transforming the financial function and thus add value to the business. Ideally, the CFO and the auditor embark on the journey of digital transformation hand in hand. The use of digital audit tools depends on the client’s system landscape and its maturity, the ability to extract data efficiently and securely, and the relevant audit standards (see Disclose, issue 1/2018, "Audit 4.0, Part 2, High-performing Auditors").

Sectors with varying needs

This development will fundamentally influence the role of both partners in the years to come. But it is not only driven by digitalisation. Other economic and regulatory megatrends are also a factor, in some cases as a result of digital transformation. To get a more differentiated view of the path this journey can take and the pace at which it can proceed, let us take a look at two sectors: industry and commerce, and banking and insurance. What follows is an overview of the most important challenges facing those operating in these marketplaces, and our responses as auditors.

Industry and commerce: cost pressure and homogeneous IT

Right at the top of the finance function’s agenda in industrial and commercial companies are automation, efficiency, costs, and gleaning insights by way of data analytics capabilities. The pressure on margins and costs is omnipresent. Thanks to SAP, the IT landscape in medium-sized and large organisations is usually uniform. This homogeneity allows the standardised and largely automated collection and analysis of data. The finance function can cut its costs by standardising, automating and centralising manual processes. This kind of transaction processing helps to raise the quality of data and address risks rapidly and efficiently by way of an integrated system of internal controls.

As long as the audited entity makes the necessary data available digitally and the auditor uses the right tools, auditors can lead the way to more rapid transformation and help enhance the quality and maturity of the finance function. Figure 1 summarises the benefits of a technology-driven audit for industrial and commercial companies. Below we will look at two of the categories of benefits and some examples.