How Robotic Process Automation Is Transforming Accounting and Auditing
How Robotic Process Automation Is Transforming Accounting and Auditing
How Robotic Process Automation Is Transforming Accounting and Auditing
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Technology continues to change society at a rapid pace, and accounting and auditing are by no means immune. New
CPAJ News Briefs: FASB, IASB, GASB News
technologies are increasingly able to mimic human activity, taking on repetitive tasks more quickly and accurately
(https://www.cpajournal.com/2020/04/30/cpaj-
than people can. The authors provide an overview of the ways in which robotic process automation may change
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how the profession operates, with a particular focus on the area of revenue audits.
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Auditing has historically incorporated many computer-dependent tools and processes, which were often
how-to-create-key-performance-indicators/)
interlinked by many manual steps and keystrokes. A new set of overlay software has emerged, however, that
! April 2020
combines these disparate actions into a single smooth automated process. Robotic process automation (RPA) uses
these new software tools, such as those offered by Blue Prism or UiPath, to transform a still somewhat handmade
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audit process into a more assembly-line audit process. RPA represents a dramatic and disruptive change in current
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audit practice that promises to allow auditors to operate at a much higher level. Leslie Willcocks, a professor at the
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London School of Economics, has defined RPA as “a type of software that mimics the activity of a human being in
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carrying out a task within a process. It can do repetitive stuff more quickly, accurately, and tirelessly than humans,
for-coronavirus-losses/)
freeing them to do other tasks” (Xavier Luher, “The Next Acronym You Need to Know About: RPA (Robotic Process ! April 2020
Automation),” McKinsey & Company, December 2016, https://mck.co/2LmMmUF (https://mck.co/2LmMmUF)).
RPA can help automate repetitive tasks, such as the copying and pasting of information. For accountants, RPA
represents the opportunity to improve audit quality; indeed, RPA is already demonstrating its ability to improve
business processes and services offered by public accounting firms (“A Holistic Approach to Insurance Automation,”
Accenture white paper, 2016, https://accntu.re/2GLBkEQ (https://accntu.re/2GLBkEQ); “Robotic Process
Automation (RPA): A Primer for Internal Audit Professionals,” PricewaterhouseCoopers, October
2017, https://pwc.to/2KTBnB8 (https://pwc.to/2KTBnB8)). Although some fear that RPA heralds the replacement
of people with robots, it is better understood as changing the role of human workers, freeing their time up for more
meaningful work.
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Exhibit 1
RPA Steps for the Audit of Revenue
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Process understanding.
Theoretically, a large number of audit processes may be a good fit for RPA. The audit processes that would benefit
the most from RPA are those that contain defined audit tasks that are repetitive and time consuming and that do
not require audit judgment. Public accounting firms may identify an audit process where RPA can add value by
considering expert knowledge, such as that of revenue audit leaders, and calculating the actual hours spent
performing audit tasks. Furthermore, the most important factor to justify automation is the number of times a firm
needs to perform a particular function, which is mainly dependent on the number of similar audits being done.
Once a firm determines that a process is a good candidate for RPA implementation, the next step in understanding
the process is to divide audit tasks into small audit modules that can be interpreted by software programs. For
example, the task of importing or exporting data is intuitive to a human user, but for a software program, the task
would have to be divided into a series of small steps:
ADS is becoming more relevant as public accounting firms consider the use of technology in financial statement
audits. An ADS template incorporates the audit-related data that is necessary to execute audit tests. Similar data
field names and formats can be designed by the firm to ensure the RPA audit application achieves its intended
objectives.
When applied to auditing, RPA is expected to not only replace manual and
mundane audit tasks, but also to motivate the re-engineering of audit
processes.
Programming audit tests as rules-based functions would enable the automatic execution of audit tests. Once audit
tests are programmed, an auditor can simply click a button for the RPA-based audit tests to import and read data,
perform rules-based audit tests, and export the results of audit tests into an audit workpaper.
While RPA has the potential to automate most parts of audit processes, it is preferable for public accounting firms
to start small. Targeting low-risk process areas that do not require audit judgment should improve the success rates
of RPA projects at firms. Starting small can also increase confidence among RPA software users.
The deployment of RPA audit tests on audit engagements is critical in measuring the success of RPA-based audits.
Parallel audit testing consisting of current (manual) audit tests and RPA-based audit tests should also be performed
as a way to validate RPA audit tools. Moreover, for RPA to thrive in audit engagements, firms should leverage the
support of their IT departments. Establishing an RPA support hotline can help auditors gain more confidence with
these tools, and ongoing communication between the audit engagement team and IT support can also help ensure
that RPA audit tools are fine-tuned to meet specified audit objectives.
What’s Next?
The excitement around RPA is well founded, and the accounting profession is readily embracing this technology.
RPA-based audit procedures have the potential to improve audit efficiency and effectiveness. More so than ever,
change in the audit profession is slowly but steadily happening, and professionals should be ready to embrace RPA
technology and enjoy the fruits of its labor.
Andrea M. Rozario, CPA is a PhD candidate at Rutgers Business School, Newark, N.J.
Miklos A. Vasarhelyi, PhD is the KPMG Distinguished Professor of Accounting Information Systems and the
director of the Rutgers Accounting Research Center and Continuous Auditing & Reporting Lab, in the
department of accounting and information systems at Rutgers Business School, Newark, N.J.
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