How Robotic Process Automation is Transforming Accounting and Auditing

Technology is changing the world faster than ever, and accounting and auditing aren’t left behind. New tools, such as RPA in accounting and auditing, can now do a lot of the repetitive tasks that accountants used to do, and they do it much faster and with fewer mistakes. The authors provide an overview of how Robotic Process Automation is transforming accounting and auditing, with a particular focus on the area of revenue audits.

Here comes a new tool called RPA in accounting and auditing. Think of it as a special software overlay that takes all those separate tasks and combines them into one smooth, automated process. Companies like Blue Prism and UiPath offer RPA software that can transform an audit from a “handmade” project into a more efficient, assembly-line style.

The good news? Robotic Process Automation isn’t about robots taking over auditor jobs. Professor Leslie Willcocks from the London School of Economics explains that RPA is software that acts like a human for repetitive tasks. It can handle things like copying and pasting information much faster and more accurately, freeing up auditors to focus on more important things.

And the benefits are already showing! RPA in accounting and auditing can improve the quality of audits by reducing errors and allowing auditors to spend more time analyzing the information. It also helps accounting firms streamline their processes and offer better services to their clients.

While some might worry that Robotic Process Automation means fewer jobs, it’s actually about changing how auditors work. RPA frees them up from tedious tasks, allowing them to focus on more strategic work and provide even greater value.

RPA in Public Accounting Practice

Public accounting firms are increasingly turning to Robotic Process Automation (RPA) to streamline their operations and improve efficiency. Robotic Process Automation software has proven particularly effective in areas like taxation, advisory, and assurance services.

For example, RPA can handle tasks like calculating tax differences and preparing tax returns, freeing up accountants to focus on more complex and strategic work. It’s also being offered as a service to clients, helping them streamline their own processes.

While RPA has been widely adopted for tax and advisory services, its use in auditing is still in its early stages, primarily due to the strict regulations governing public company audits. However, there’s significant potential for RPA to automate routine tasks in revenue audits, such as reconciliations and analytical procedures. This can allow auditors to allocate more time to analyzing the results and identifying areas for improvement.

By automating these time-consuming tasks, RPA can help public accounting firms improve audit quality, reduce costs, and enhance client satisfaction. It’s a powerful tool that can transform the way accounting firms operate and stay competitive in today’s fast-paced business environment.

Exhibit 1

Robotic Process Automation Steps for the Audit of Revenue

RPA for Reconciliation and Analytical Procedures

In the audit of revenue, Robotic Process Automation can assist auditors by logging into a client’s secure file transfer protocol (FTP) site to retrieve related audit evidence, including the listings for current and prior year sales and the trial balance. RPA can then calculate the total sales per the listing and compare it to the total per the trial balance. Assuming the amounts reconcile, RPA can subsequently calculate whether the total revenue amount from the current and prior year listings is materially different, and generate an alert if the difference exceeds the materiality threshold.

RPA for Dual-Purpose Audit Tests

Think of Robotic Process Automation as a helpful assistant that can check if the numbers match up between sales invoices, orders, and shipping documents. If there’s a mismatch, it will flag it for you. This frees up auditors to focus on more important tasks and helps ensure the accuracy of the audit. By using RPA, auditors can get a better understanding of how the company works and identify potential risks more effectively.

A Three-Step Guide to Using RPA in Audits

Robotic Process Automation is a way to use technology to improve processes. When applied to auditing, RPA doesn’t just replace repetitive tasks but can also lead to a complete redesign of how audits are done. Public accounting firms looking to implement RPA can follow a roadmap outlined by experts K. Moffit, A.M. Rozario, and M.A. Vasarhelyi in their paper, “Robotic Process Automation for Auditing” (Journal of Emerging Technologies in Accounting, forthcoming). This roadmap breaks Robotic Process Automation implementation into three main stages: understanding the process, standardizing audit data (ADS), and executing automated audit tests (or audit apps).

Understanding the Process.

A lot of audit processes can benefit from RPA, especially those that involve repetitive tasks that don’t require much judgment. Public accounting firms can identify areas where RPA can add value by consulting experts, like revenue audit leaders, and tracking the time spent on various audit tasks. One key factor in deciding whether to automate a process is how often the firm performs it, which depends on the number of similar audits being done.

Once a process is identified for automation, the next step is to break it down into smaller tasks that can be understood by the software. For example, a simple task like importing and exporting data, which is easy for a human, would need to be broken into smaller steps for the software, like:

1. Identifying the directory to import the file from
2. Importing the file
3. Saving the file
4. Exporting the saved file to another directory.

Standardizing Audit Data (ADS).

For RPA to work correctly, the data used in the audit must be consistent across different sources. For instance, data might come from a client’s ERP system or a third-party asset manager, but if the field names for the same data vary across these reports, the Robotic Process Automation software won’t be able to perform the audit as planned. That’s why the second step in implementing RPA is to create a standardized template for the audit data in each process being automated.

This standardization becomes even more important as public accounting firms incorporate more technology into financial audits. With an ADS template, firms can make sure the data used by the Robotic Process Automation software is consistent, helping the system achieve its audit goals.

Executing Automated Audit Tests.

The last step in implementing RPA in auditing is to set up the software to run the automated audit tests and then use it on real-world audits. There are many RPA tools available, such as BluePrism and UiPath, which are well-known for their ease of use, often requiring little to no programming. However, some programming languages like Python and R can be useful for more advanced RPA functions, though they require some coding skills.

Once these tests are set up, auditors can simply run the RPA audit programs, which will handle tasks like importing data, performing the audit tests, and exporting the results. This automation not only speeds up the process but also reduces errors and allows auditors to focus on more value-added activities.

Programming audit tests as rules-based functions allows the automated execution of these tests. Once the tests are set up, auditors can simply click a button, and the RPA software will import and analyze the data, perform the programmed tests, and export the results into an audit workpaper.

Although RPA has the capability to automate most parts of the audit process, it’s recommended for firms to start small. Focusing on low-risk areas that don’t require a lot of judgment from the auditor is a good way to ensure early success. This approach not only increases the chances of a smooth implementation but also builds confidence among the users of Robotic Process Automation software.

Implementing RPA in real audit engagements is key to determining how effective it is. One way to validate the use of Robotic Process Automation in audits is by running both manual and automated audit tests side by side. This parallel testing helps ensure the RPA tools are working as expected.

For Robotic Process Automation to really succeed in audits, firms need to collaborate closely with their IT departments. Setting up an RPA support system, like a help hotline, can give auditors more confidence in using these tools. Constant communication between the audit team and IT support will also ensure that RPA tools are continuously improved and tailored to meet the firm’s audit goals.