Digital revolution in the audit sector
NHH researchers are about to conduct an extensive study of the transformation taking place in the audit sector. The Research Council of Norway has granted the project NOK 10 million to study this digital revolution.
Text: Sigrid Folkestad
‘All of the big international audit firms have announced that they are making major investments in the digitalisation of auditing,’ says Associate Professor Finn Kinserdal of the Department of Accounting, Auditing and Law (IRRR).
The firms are rationalising their practices to ensure smarter auditing of a higher quality. This applies to all of the five big firms; Deloitte, EY, KPMG, PwC and BDO.
‘Business and industry expect the audit firms to benefit from digital data and digitalised auditing,' says Professor Aasmund Eilifsen of the same department.
Eilifsen is head of the research programme ‘Digitalisation in the audit profession: Digital Audit Research Project’.
Researchers at IRRR will closely follow the change processes taking place in the audit sector. The objective is to generate knowledge about the advantages and challenges of digitalised auditing and advise the industry about the digital change processes.
This project has been made possible by the funding granted by the Research Council of Norway, through the PROFESJON initiative. NHH is behind two of the three business administration projects that were accepted (see the fact box).
Financial researchers and audit researchers at NHH were granted NOK 10 million each.
‘Highly original concept’
Eilifsen is delighted to have the opportunity to study the audit and consultancy firms in depth.
‘This gives us a unique opportunity to lead the digital auditing field, and thereby also give our students an even better education,’ says Eilifsen.
The Research Council of Norway is in full agreement. They didn’t spare the superlatives when Eilifsen and his colleagues were granted NOK 10 million.
They made the following comments in their assessment of the Digital Audit project.
(This is a) highly original project concept. The project is in the forefront of its field and will contribute to scientific innovation as well as generate important new knowledge. The project is of excellent quality, with no significant weak points. Publications in leading scientific journals in the field are highly likely.
Bright minds pursue careers in auditing
‘There is a huge international potential in this research, and we have had a lot of interest both from the industry itself and other researchers – as well as from our students. Many of the brightest minds at NHH have pursued careers in the audit and consultancy field,’ says Eilifsen.
More than 45 per cent of all new recruits to the big audit and consultancy firms in Norway have studied at NHH.
‘This means it is crucial that NHH keeps up with developments and can provide the education required of accountants in future both in the short and long term,’ says Kinserdal. He was previously a partner in EY, and led its auditing activity in Norway.
The auditing experts are therefore launching a new course in spring 2018. In Digital Auditing, the lecturers will go through the changes in clients’ accounting processes as a result of digitalisation and look at the consequences this has for auditing and how audits can utilise digital data by using advanced analysis tools.
Auditing in future
Eilifsen and Kinserdal are not concerned about the prospects for future NHH students.
‘The audit and consultancy sector will still require expertise in the future. They will need highly-educated people who can exercise good judgement, and who have the necessary theoretical and digital ballast, which our students have,’ says Eilifsen.
‘What is now happening is that digitalisation is cutting out routine tasks, which I think is positive. This means that capable employees can instead employ their expertise to perform analyses that create value,’ says Kinserdal.
Tiresome procedures and manual tasks will be replaced by robots and the use of big data. How will digitalised processes replace traditional auditing and how much digital competence do accountants have today?
These are two of the topics of the research project, which will be led by Professor Eilifsen. DnR (the Norwegian Institute of Public Accountants) Professor Bill Messier (NHH and the University of Nevada,) and Associate Professor Kinserdal will assist in the coordination and management of the project.
The research consists of four specific projects performed by multidisciplinary teams of NHH and international researchers conducted in collaboration with the large international audit firms:
1. The first project consists of a broad survey of Norwegian accountants' digital competence and the ongoing digitalization processes in the audit firms.
2. The second project aims at gaining understanding of the effects, both beneficial and detrimental, of a digitalized environment on accountants' judgments and decision-making.
3. The third project focuses on how digitalization of the audit client affects the audit.
4. The forth project addresses how to train and prepare students for a professional career in a highly digitalized audit environment. The research will generate knowledge about the benefits and obstacles resulting from digitalization of the audit which will help guide the audit profession of the digital transformation process. The knowledge will facilitate innovation of the master education of accountants, including the development of digital audit courses, to prepare students for the new digital professional reality.