The Center for Audit Quality has published a new report on top technology risks and highlights auditor considerations regarding those risks. The resource “Emerging Technologies, Risk, and the Auditor’s Focus,” is intended to help auditors, audit committees, and management get a better handle on the risks and challenges that come with new technology, particularly as they relate to financial reporting.
The guide, “explores financial reporting implications of the evolving use of technology such as artificial intelligence, the internet of things, and smart contracts. As the resource highlights, a solid understanding of the benefits and risks of these technologies is necessary for auditors, audit committees, and management to execute their respective responsibilities effectively,” the CAQ said in a statement.
The report also delves into areas of auditor focus when it comes to the impact of emerging technology on business, internal control over financial reporting, and audit committee oversight.
According to the publication, there are four critical steps for auditors in a changing technology environment, which are:
- Maintaining sufficient professional skepticism when reviewing management’s risk assessment for new systems.
- Understanding the direct and indirect effects of the new technology and determining how its use by the entity affects that auditor’s overall risk assessment.
- Understanding how the technologies impact the flow of transactions, assessing the completeness of the in-scope internal control over financial reporting systems, and designing a sufficient and appropriate audit response.
- Assessing the appropriateness of management’s processes to select, develop, operate, and maintain controls related to the organization’s technology based on the extent the technology is used.
The publication also includes a reader survey, intended to gather more information on the risks associated with emerging technology, that will likely inform future guidance from the CAQ on the topic. 