In today’s globalized business landscape, with ever-increasing regulatory scrutiny, group audits have become increasingly complex. Emerging technologies are revolutionizing the group audit process with solutions to navigate the complexities and enhance audit quality.

With multiple entities, diverse operations and vast data sets to contend with, auditors face a daunting task in ensuring the accuracy and integrity of financial statements across the group. However, the rapid advancement of technology presents a powerful ally to auditors, offering game-changing solutions that are revolutionizing the group audit process.

What is a group audit?

A group audit is an audit of financial statements that includes the financial information of more than one component or entity. A group is made up of a parent entity and its subsidiaries, associates, joint ventures and any other entities whose financial information is included in the group’s consolidated financial statements.

Group audits are complex due to the diverse nature of the components, different geographical locations, varying legal and regulatory environments, and the need for effective communication and coordination among multiple teams. Auditors must carefully plan and execute group audits to obtain sufficient and appropriate audit evidence to support their opinion on the group’s consolidated financial statements.

Centralized data management

One of the biggest challenges in group audits is managing data from multiple sources across various entities. Traditional data extraction, consolidation and reconciliation methods are time-consuming and prone to errors. However, automation and data analytics tools offer a streamlined solution by centralizing data management and providing a unified view of the group’s financial information.

Robotic process automation can seamlessly extract and consolidate data from different systems and locations, ensuring consistency and accuracy across the group. Advanced analytics tools can then analyze this centralized data, identifying patterns, anomalies and potential risks that may have been overlooked through manual processes. This centralized approach enhances efficiency and provides auditors with a comprehensive understanding of the group’s financial position, enabling more informed decision-making.

AI-powered risk assessment and fraud detection

Assessing risk and detecting fraud across multiple group entities can be a daunting task, mainly when dealing with vast amounts of data. However, artificial intelligence is proving to be a powerful ally in this task. AI-powered tools can analyze vast data sets, identify suspicious transactions, and generate risk profiles for each entity within the group.

By leveraging machine learning algorithms, these tools can continuously adapt and refine their risk assessment and fraud detection capabilities, ensuring auditors are always ahead of the curve. Additionally, natural language processing can be used to analyze unstructured data, such as contracts and agreements, further enhancing the auditor’s ability to identify potential risks and red flags across the group.

Blockchain and continuous auditing

Blockchain technology offers a new way to improve group audits, making them more secure and open. Blockchain supports auditors checking transactions as they happen instead of reviewing them later. The approach, called “continuous auditing,” where financial activities are examined in real-time or very soon after they occur, differs from traditional auditing methods, where checks are done periodically, often annually.

The ongoing approach behind continuous auditing makes auditing faster and gives everyone involved a clearer view of what is happening, especially valuable in group audits. Because blockchain records can’t be changed once they’re made, auditors can rely less on manual checks, feel more confident that the financial information is correct, and can be relied upon across the entire group.

Regulatory compliance and legal considerations

As technology continues to reshape the auditing profession, governments and regulatory agencies are taking notice. With changing professional standards and increased scrutiny, auditors must stay ahead of evolving regulations to ensure compliance across the group.

The Security and Exchange Commission recently approved the Public Company Accounting Oversight Board’s amendments to two auditing standards, AS 1105, Audit Evidence, and AS 2301, The Auditor’s Responses to the Risks of Material Misstatement. These amendments address audit procedures, by specifying and clarifying “auditors’ responsibilities when the auditor uses [technology-assisted data analytics] tools in conducting audits.”

The PCAOB stated in a release that these amendments should help reduce an auditor’s reluctance to use technology-assisted analysis under existing auditing standards by clarifying auditor responsibilities in using reliable information in audit procedures and audit evidence for multiple purposes in addition performing tests of details.

In approving the PCAOB’s amendments, the SEC said the changes would modernize audit standards, address technological advancements in auditing, and align liability standards with other professional conduct standards. The updates are intended to enhance audit quality, increase investor protection and instill greater trust in financial markets.

Failure to adhere to these and other existing and evolving standards can result in significant fines and potential legal liabilities for audit firms and individual auditors. Regulatory bodies are increasingly utilizing advanced technologies, such as AI and data analytics, to uncover errors and deficiencies in group audits, making it imperative for auditors to prioritize compliance and implement best practices across the group.

Talent acquisition and skill development

The digital transformation of group audits demands a paradigm shift in auditors’ skill sets. While traditional accounting and auditing knowledge remains essential, auditors must also possess technical skills in areas such as data analysis, coding and cybersecurity.

To meet this demand, audit firms are actively recruiting candidates with diverse backgrounds, including data scientists, engineers and computer science graduates. In addition to heavily investing in technology, firms are focusing on upskilling and continuous learning programs to ensure existing auditors have what it takes to meet the transformational changes occurring in the audit profession.

Furthermore, soft skills such as collaboration and communication remain crucial in navigating the complexities of group audits. Auditors must be able to share information across multiple entities effectively, communicate findings to stakeholders, and address the complex relationships within the group.

What’s ahead

New technologies and the more complex and stringent global regulatory environment demand a paradigm shift in how we approach the complexities of auditing multinational entities.

As we embrace centralized data management, AI-powered risk assessment, blockchain-enabled continuous auditing and other emerging technologies, auditors are not just enhancing efficiency — we are fundamentally reimagining the audit process. These advancements offer unprecedented opportunities to improve accuracy, increase transparency and provide deeper insights into the financial health of complex organizations.