Mercer & Hole's audit and business advisory partner Andy Turner gives his view on how technology is advancing the process of audit and what we might expect to see in the audit of tomorrow.

Where are we now?
The pace of technological change in recent years has been immense and innovation shows no signs of slowing down. Most audit firms have moved towards paperless files, Mercer & Hole included, and for all of us within the profession the challenge is to improve audit quality but this often comes with cost pressures too.

Technology can improve both audit quality and drive efficiencies into the audit process and there is a real need to ensure this is incorporated into the audit process – if a firm does not they may not be giving their clients the best possible service. The audit of the future definitely needs to incorporate technology in what is fundamentally a three step process:

  1. Extraction of the data;
  2. Performing analytics on the data; and
  3. Investigation of exceptions

Read the entire article on AccountancyAge.

The AICPA’s Auditing Standards Board (ASB) is taking steps to enhance the consistency of financial reporting between public and private companies. A new omnibus auditing standard will cover standards on related parties, communications with audit committees, and consideration of fraud in a financial statement audit.

Read more: AICPA to Make Private Company Auditing Standards More Similar to Public Company Standards

In November 2017, the American Institute of Certified Public Accountants (AICPA) published an updated audit and accounting guide on analytical procedures. The use of audit analytics can help during the planning and review stages of the audit. But analytics can have an even bigger impact when these procedures are used to supplement substantive testing during fieldwork. Here’s how your auditor uses analytical procedures to make your audit more efficient and effective — and why it’s critical for you to tell your auditor about major changes during the accounting period.

Read more: How Auditors Use Analytical Procedures

Contact: Peggy McCaffrey

In a no-action letter issued by the Securities and Exchange Commission (SEC) Division of Investment Management to Fidelity Management and Research Company in June 2016, the SEC provided temporary relief in connection with audit firm independence and Regulation S-X Rule 2-01 (c)(1)(ii)(A), or, the “Loan Rule.”

That temporary relief was set to expire on December 20, 2017, but now has been extended indefinitely — or upon “the effectiveness of any amendments to the Loan Provision designed to address the concerns expressed in the Relief.” Until such time, the SEC has promised not to take action against entities using auditors who are potentially in violation of the Loan Rule. The Rule deems an audit firm not independent if the firm, any covered person in the firm or any of their immediate family members have a loan to or from an audit client, or beneficial owners of more than 10 percent of the audit client’s equity securities.

Read more: SEC Extends No-Action Relief for Auditor Independence

Author: Chris Valponi, CPA

For many companies, keeping close tabs on revenue, expenses, and profit is the number one priority. However, companies that carry inventory may not realize its direct effect on profitability.  This effect is known as shrinkage.  Shrinkage is the excess amount of inventory (in accounting records) that no longer exists in the actual inventory. In other words, it is a loss of inventory.

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