1 / 31

Imagineering Audit 4.0

Imagineering Audit 4.0. Jun Dai and Miklos A Vasarhelyi. Agenda. Background Definition of Audit 4.0 Key Elements Imagneering of Audit 4.0 Challenges Conclusion and Future Research Questions. Background.

jonl
Download Presentation

Imagineering Audit 4.0

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Imagineering Audit 4.0 Jun Dai and Miklos A Vasarhelyi

  2. Agenda • Background • Definition of Audit 4.0 • Key Elements • Imagneering of Audit 4.0 • Challenges • Conclusion and Future Research Questions

  3. Background • Advances in Cyber-Physical Systems (CPS), Internet of Things (IoT), Internet of Service (IoS), and Smart factory promote a new industry revolution • Industry 4.0(Industrie 4.0) became publicly known at Hannover Fair in 2011 The German federal government announced Industry 4.0 as one of the key initiatives to implement the German high-tech strategy 2020 • “Industry 4.0 is a collective term for technologies and concepts of value chain organization. Within the modular structured Smart Factories of Industry 4.0, CPS monitor physical processes, create a virtual copy of the physical world and make decentralized decisions. Over IoT, CPS communicate and cooperate with each other and humans in real time. Via the IoS, both internal and cross-organizational services are offered and utilized by participants of the value chain.” (Hermann et al. 2015)

  4. Audit 4.0 Definition • Audit 4.0 will piggyback on technology promoted by Industry 4.0, especially the IoT, IoS, CPS, and smart factories, to collect financial and operational information, as well as other audit-related data from an organization and its associated parties • It analyzes, models, and visualizes data in order to discover patterns, identify anomalies, and extract other useful information for the purpose of providing effective, efficient, and real-time assurance • It is typically an overlay of Industry 4.0 business management processes and uses a similar infrastructure, but for assurance purposes

  5. Evolution of Auditing: From 1.0 to 4.0

  6. Four Elements • Standards • Principles • Technology • Auditors

  7. Standards • Assurance, in the world of Industry 4.0, will be largely dominated by formal inter-object protocols, the technical capabilities of “things”, and the objective functions of the interlinked objects. • Examples: • Inventory measurement would be automated by obtaining and tracking the current values of purchases • Products will autonomously issue alerts if they are obsolete, slow-moving, or damaged, to prevent including or overstating the value of obsolete inventory • Manufactured inventory can be constantly measured by collecting real-time data regarding energy consumptions of production lines and labor costs. Many items that were overhead allocation will be measured directly

  8. Principles • Interoperability: Traffic lights and cars, automatic confirmation between two related parties • Virtualization: a virtual copy of the physical world – the Mirror World • Decentralization: each machine or device can individual decisions and adjustments • Real-time capability: continuous auditing and control monitoring • Service orientation: any resource could be served as a service via networks • Modularity: using apps for analytics

  9. Technology • Sensors: collect real-time accounting information, such as quantity and quality of inventory, working hours of employees, energy consumption... • Cyber-physical systems: embedded computers and networks monitor and control the physical processes, usually with feedback loops where physical processes affect computations and vice versa • Internet of things: objects linked through a network • Internet of service: service vendors can offer their services via the internet • Smart factories : use CPS, and IoT/S to assist people and machines in the execution of their tasks • Others: RFID, GPS, and data analytics

  10. Auditors • In a world of intense automation and process scrutiny, the skillset of auditors is to change dramatically. • The auditor must be much more technically trained, but processes must also be built with untrained users in mind. • Auditors will have specialized dashboards that will include close to real time alerts • Byrnes (2015) developed a “super-app” to supplement auditor usage of clustering. This tool not only performs clusterizationbut also applies statistical knowledge to complement auditor knowledge.

  11. Imagineering Audit 4.0 - Overall

  12. Imagineering Audit 4.0 – Inter-businesses

  13. Imagineering Audit 4.0 – Intra-business

  14. Imagineering Audit 4.0 –Audit Service

  15. Challenges • Digital crime: technique given, technique taken • Security and privacy issues of companies’ data • Standardization of information and data

  16. Conclusion • This paper foresees the impacts of the fourth industrial revolutionon the auditing profession, imagineers the use of new schemata promoted by Industry 4.0 for audit purposes, and identifies challenges in the transformation towards the new generation of auditing.

  17. Future Research Questions • What new types of audit evidence can be generated and collected in the context of Audit 4.0? • As more data will be collected in Audit 4.0, how can auditors avoid information overload to find relevant auditing information? • How should the auditing standards be changed to adapt to the next auditing environment? • What are the new audit procedures to be developed/ created in Audit 4.0? • What new knowledge should auditors obtain to perform audits in Audit 4.0? • What should be done to protect the security and privacy of companies’ sensitive information in Audit 4.0?

  18. Future Research Questions (cont.) • How should external and internal auditors cooperate to enable Audit 4.0? • Will the current audit model be changed in Audit 4.0? • What are the new roles of the different lines of defense? • How can predictive and prescriptive audits be used in Audit 4.0? • Audit 4.0 will considerably lower the cost of auditing procedures. These are typically the result of tradeoffs of the cost of a particular procedure versus the benefits of such examination. How will this change the depth of examination, the procedures used, and their frequency of usage? • As many emerging technologies/systems are used in Audit 4.0, what are new controls that should take place to examine whether the technologies/systems operate as they are supposed to do?

  19. A conceptual framework of an audit plan cognitive assistant Qiao Li Miklos A. Vasarhelyi Rutgers, the State University of New Jersey

  20. Introduction What is Audit Plan BrainstormingSession: Limitations with Checklist: • Structurally-restrictive tool • limits new ideas generation &induces biases • Uncollected experienceandexpertise • No information retrieval or recommendation support Current computer assisted audit tools and techniques (CAATTs)cannotprovide effective decision support for audit planningriskassessment Purpose: • Identify risks and discuss how a material misstatement, whether fraudulent or erroneous, could occur (AICPA, 2016, Landis 2008, Hammersley et al. 2010, Beasley and Jenkins 2003) Commonprocedure: • Checklist • Open-ended form (Bellovary and Johnstone 2007)

  21. Proposed Audit Cognitive Assistant Luca Open an application Luca Luca Luca Interface industry Luca Processing… Client Query Recommended Topics: General understanding, new events, business risks… Position You may also interested in:… • Modules: • Automatic Speech Recognition (ASR) • Language Understanding • Dialogue Management • Natural Language Generation • Text-to-Speech synthesis Domain: judgement or experience Unstructured: financial statements, accounting policies, analytical procedures, litigation, claims, recent news information, audits workpapers, prior year audit deficiencies and adjustments… User interaction: queries and search Show Answer Answer Architecture Query Classifier QA Automatic Speech Recognition Knowledge Base Question or Action DBMS text Action Execute Action Audit Related ApplicationsIt Can Access Knowledge Database backstagesupporter Web Search Calculator Open (ACL, IDEA…) • Domain Knowledge • Knowledge about users • Unstructureddata Open standards Open templates Audit work paper Calendar …….

  22. LucaQ-AModule Knowledge base Answer Selection Question Analysis Answer Question Machine Learning Models Answer with highest score Normalized Question Doc. With Candidates Query Generation Answer Matching Answer Extraction Generated Query Keyword extraction; Punctuations, abbreviations, nouns and verbs ② DBMS ① ① +② IR-based (Domain) QA + Knowledge-based (Cognitive) QA Paired QA NL Answer Generating Answer

  23. Application to other audit phases Major phases of an audit: Client acceptance, preliminary engagement activities, audit plan, internal control audit, business processes and accounts audit, audit completion (Messier et al. 2016).

  24. Application to other audit phases Application of the proposed tool to: Client Acceptance

  25. Contract Analytics and Technological Process Retrofitting Zhaokai Yan

  26. INDEPENDENT PROCESS AUDIT VALUE NETWORK SUSTAINING CLIENT FIRM USAGE CONTINUOUS AUDITOR TECHNOLOGY ACCEPTANCE (MODIFIED UTAUT) DISCONTINUOUS ADVISORY AUDIT MARKET PERFORMANCE EXPECTANCY EFFORT EXPECTANCY MAINSTREAM AUDITING PRACTICE REGULATION SOCIAL INFLUENCE FACILITATING CONDITIONS PRICE VALUE INDIVIDUAL DIFFERENCE POTENTIAL DISRUPTIVE

  27. Thank you!

More Related