This report titled ‘Global Audit Spending by Audit Firms 2015-2019‘, provides an in-depth analysis of the market in terms of revenue and emerging trends. To calculate the market size, the report considers the IT spending on hardware, software, and services by audit firms globally.
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“SaaS has led to the increased adoption of IT in auditing. SaaS-based audit services help in effective internal controls with smaller transaction samples during the audit. SaaS helps in following an efficient audit approach with less audit time at lower cost. It also enables auditors to gather real-time information on their own and assist managements in taking business decisions by generating ad hoc reports and powerful insights,” said Amit Sharma, one of Technavio’s lead industry analysts for IT spending.
“Increasing demand for field audits has led to the adoption of mobile technology by auditing firms. Field audits involve the use of mobile devices for collecting and gathering evidence to conduct audits remotely. Audit firms are therefore anticipated to grant prominence to mobile technologies over the forecast period for increasing auditing efficiencies,” added Amit.
Some of the other driving forces behind the growth of the global IT spending by audit firms are as follows:
- Increased need to improve audit efficiency
- Wider application of accounting information systems in businesses
- Need to enhance consistency of audit work
- Increased competitive pressure
Increased need to improve audit efficiency
Information technology is being rapidly adopted in audit processes due to the increasing availability of low-cost personal computing and productivity software (spreadsheets and word processing), statistical software, and CAATT (audit command language). Audit automation is therefore witnessing rapid growth with the increasing adoption of IT in the current auditing framework.
There is a growing need for audit quality improvements that help firms gain visibility among clients. In addition, IT is also used to automate repetitive audit tasks done manually such as the use of analytical review templates and standard documentation. Furthermore, it helps overcome challenges such as shortage of qualified audit personnel.
Wider application of accounting information systems in businesses
Many businesses are constantly increasing the application of ERP and AIS. Auditors are therefore required to gather and assess evidence to ensure that AIS is correctly processing business transactions. Also, they must ensure that AIS is maintaining a high level of accuracy, integrity, and validity of the information which is critical to the business. Thus, there is an increase in complexity of clients' AIS. Audit firms require advanced tools and techniques to trace audit evidence during financial auditing. Thus, audit firms have increased the adoption of audit technology to audit their clients' businesses.
Need to enhance consistency of audit work
Dynamic business environment has led to an increase in the demand for consistency in quality audit work and documentation. Earlier, audit firms tried to maintain audit work consistency with the use of standard letters of representation and prescribed procedures. Adoption of information technology has therefore enhanced the consistency of audit work with a number of tools and aids.
For instance, a computerized accounts compliance checklist enforces a more consistent and disciplined approach in audit work. Audit firms are thus adopting a fully integrated automation approach rather than a piecemeal one to improve consistency. The application of IT to audit work helps conduct audit process according to the auditing firm's requirements and standards.
Increased competitive pressure
The audit market is highly concentrated and the market is dominated by the Big Four firms (Deloitte, E&Y, KPMG, and PwC). However, mandatory auditor tendering and rotation reforms by various regulators across the globe have led to the entry of more audit firms in this market. The Big Four firms are slowly losing their market share to these firms, a trend that is expected to further intensify competition. In addition, audit services are highly regulated and commoditized, which reduces differentiation opportunities for audit firms. It has led to increasing adoption of information technology by audit firms to provide differentiation in their offerings.
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