It’s very well said that change is only constant!!

In this age and time, Management System and auditors face greater challenges in their task.   They need to respond effectively to the demands of a rapidly changing and complex business environment, while helping organizations continue comply with growing regulatory mandates and conform to other requirements.

Traditional and Modern

The concept and motive of auditing has been subject to many changes during the recent eras. Hence the environment is constantly changing, the Techniques and models on which the essentials of audit focus need to change.

An audit which starts with traditional audit techniques like vouching, Verification for each and every transaction, casting, tallying and thus computing profit and Ratio analysis at the end may seem to be satisfactory up to a point of time. Beyond this limit, the entire audit operations become rather stereo-type, consuming much time and eventually resulting to impermanence.

Why Need of Change from From Traditional Audit to Modern Audit Technique?

The modern audit techniques and tools help uphold the relevancy and timeliness of the audit, they must be used to develop and deliver a higher quality audit to better serve the interests of investors. As these tools enable the auditor to amass a wide range of information from the client, they open up the possibility for the expansion of the auditor’s assurance beyond the financial statements, including, to name a few, cybersecurity and sustainability reporting.


New technological tools have the potential to enable the auditor to mine and analyze large volumes of structured and unstructured data related to a company’s financial information. This capability may allow auditors to test 100 percent of a company’s transactions instead of only a sample of the population.

The major accounting firms have asserted that the use of these tools will enhance the audit by automating time-consuming tasks which are more manual and rote in nature. This perspective has been embraced by the leadership of the major accounting firms as it relates to the use of technology in the conduct of an audit.

it is evident that a shift to Information Technology is an indispensable requirement for achieving the benefit of Analytical Audit. In fact, it could create a simplified system that would enable auditor to concentrate on critical areas, which otherwise could have been done manually that may neither be highly-accurate nor perfectly logical.

In today’s rapidly changing business and technology environs, auditors cannot afford to suffer the consequences of delays, inaccuracies or incomplete information.

Audit methodology and strategy must be able to detect control gaps and weaknesses in a ‘real-time’ environment, making it possible to report and rectify any areas for improvement Value-add auditing can help validate the adequacy of management’s continuous monitoring Controls and it can also help organization to focus on high risk or significant areas of exposure to the organization.   

About the Techniques & Tools of Modern Audit.

System Based Approch:

However, in the system based audit approach, auditors first understand that there is a strong internal control system being used based on their understanding from the entity’s management team. Yet, before relying on the system or internal control, auditors will need to perform a full understanding of the client’s internal control over financial reporting.

This Technique is different from the sustentative audit procedure. Once they performed an understanding of internal control, auditors will then need to perform testing and validating those internal controls. This is to ensure that they are strong enough to produce the correct financial reporting.

Computer Assisted Audit Technique (CAAT): Modern Audit Tool

The CAAT method of testing is often used to analyze large volumes of data, but it can also be used to analyze every transaction, rather than just a sample of all performed transactions. There is a specially designed software used to perform a CAAT. The test can range from the use of a fairly simple spreadsheet to using highly specialized databases or additional software designed specifically for data analytics, such as IBM Analytics or Apache Hadoop.

There are classifications of CAATs – namely

1. Audit software

2. Test data

3. Other techniques

Audit software:

Audit software is a generic term used to describe computer programs designed to carry out tests of control and/or substantive procedures. Audit specialized software may perform the following functions:

> Data stratification

> Sample extractions

> Missing sequence identification

> Statistical analysis

> Calculations

> Duplicate transaction identification

> Pivot table-creation

> Cross-tabulation

Test data:

Audit test data is used to test the existence and effectiveness of controls built into an application program used by an audit client. As such, dummy transactions are processed through the client’s computerized system.

Other CAATs include:

Embedded audit facilities (EAFs):

This technique requires the auditor’s own program code to be embedded (incorporated) into the client’s application software, such that verification procedures can be carried out as required on data being processed

Application program examination:

When determining the extent to which they may rely on application controls, auditors need to consider the extent to which specified controls have been implemented correctly.

In Effect audited virtually:

A virtual audit turns the practice on its head: The work that’s usually done in the field is done virtually in the office, and the wrap-up phase, which is normally done in the office, is done in the field. Rather than traveling to a client’s offices, the auditors perform the routine work of examining the client’s documents in the auditors’ office using information uploaded to a secure portal.

Once the routine tasks are completed, engagement leaders visit the client for the wrap-up phase. Questions raised during the in-office portion of the audit are answered, and issues that require judgment are resolved.

Predictive Analytics

As the name implies, predictive analytics involves using advanced data analysis techniques to make predictions—based on probabilities—about the future, and may involve advanced technologies such as artificial intelligence and machine learning to refine those predictions. In the context of the high-quality audit, auditors can employ digital tools to extract information from an organization’s systems, and then use predictive analytics for the purpose of identifying patterns that either align or don’t align with anticipated outcomes and trends. This type of analysis is conducted for various reasons, but it is especially useful in gaining deeper insight into a client’s business and financial risks.

Ascendancy of Modern Audit Techniques over Traditional Audit.

> Increase the accuracy of audit

> Perform audit tests more efficiently, which in the long-term will result in a more cost effective audit.

> Test the reliability of client software, i.e. the IT application controls (the results of which can then be used to assess control risk and design further audit procedures).

> Independently access the data stored on a computer system without dependence on the client.

> Standardized Documentation.

> File Storage and File Sharing.

> Automated Expected Values and Threshold Analysis.

> Fewer opportunities for error as well as compliance with audit and review guidelines.

> Standardization can help your firm communicate the details of financial statement materials in a clearer and more concise manner.

> Predictive analytics will continue to help auditors identify trends more quickly when looking at client financial metrics.

> Storing and sharing files across globally-accessible web-based software will enable you to standardize processes across multiple users in your firm Etc.


♦ The clearest benefit for firms from these advances is the increased collaboration that will occur between compliance and advisory services. These clarified methods of audit analysis will ultimately help identify the ways that accountants can help their client’s businesses become more successful.

♦ Accelerated continuous auditing that will turn the performance of an audit as an on-going process rather than audits being a “financial sprint” to compile and analyze data.

♦ Current technology has enabled auditors to analyze extensive amounts of financial data, allowing accounting professionals to more easily identify areas of risk. These technologies have also helped streamline time per audit and produced higher quality assurance.

Contemplation factors involved with Modern Auditing Technique’s.

The change from Traditional to Modern techniques is a vital matter since due to the dynamic nature and expanding volume of business the same requires a careful planning coupled with well-trained personnel and infrastructural facilities.


♦ Auditors should take care that they are not over relying on data analytics. As powerful as these tools are, or are expected to become, they nonetheless are not substitutes for the auditor’s knowledge, judgment, and exercise of professional skepticism.

♦ The use of these Modern Auditing tools and methods raise certain challenges. For example, it is important that the data being used is reliable, complete and accurate. That is true for general ledger data, other financial and operating data, and data from outside the company. Data security and quality control over these tools, whether developed in-house or by vendors, are also factors for firms to consider.

♦ Some too are concerned that auditors will use these tools to provide additional insight to management about their operations and processes rather than to improve audit quality and investor protection.

♦ Particularly interested in how these new predictive methods will benefit investors and how much of what the auditor learns from these new tools will be made available to investors in a transparent way so as to enable them to make a more informed investment decision.

♦ the future auditors — to be knowledgeable about this evolving world of technology. Firms are looking to hire top talents who have abilities in science, technology, engineering, and mathematics along with the ability to work with large quantities of data and possess strong analytical skills.

(Above article was written on 19th Dec, 2019. Views expressed are strictly personal.)

(Author can be reached at [email protected])


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Qualification: CA in Job / Business
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