Cloud accounting and auditing
The beginning of the end or just the same old story.
Xero’s CEO, Rod Dury recently has commented that the inherent integrity within a cloud integrated system of accounting reduces the need for an independent audit. Could it be that cloud computing will spell the end of auditing altogether?
Mr Dury has said “A lot of what’s required on audit goes away with a high integrity system which is continuously looking at the data”. He has floated the idea of continuous certification of data so that if the Xero file is being used correctly, the data simply cannot be incorrect.
Optima Audit applaud the line of thought that focuses on the use of control to ensure day to day transactions are impervious to fraud and error. Indeed, all auditors have endorsed the use of controls for a very long time. Cloud computing is just the next step in a very long line of controls that accountants have always used to reduce the risk of misstatement.
However, we would remind readers that an audit does not only check day to day transactions. Indeed that hardest part of auditing is not checking transactions, rather it is checking judgements, estimation and assumptions. The sort of controls that Mr Dury is talking about will never eliminate the need to audit:
- valuation of assets (the risk that started the GFC);
- valuation of share based payments;
- completeness of creditors (have you recognised all your creditors);
- completeness and fairness of disclosure;
- appropriate choice of accounting policies; and
- judgement of insolvency and going concern
These points are just a starter. As a signing audit partner within an accounting firm, I can assure you that it is like those I’ve just mentioned that give me pause rather than simply day to day transactions. The majority of adjustments we make at Optima concern impairments of assets, changes to disclosure and incompleteness of liabilities.
Audits still have a place in the cloud. For us auditors, cloud computing is just another control to document.
Michael Cooper – Director