Technology companies are set to challenge accountancy firms’ traditional dominance of the audit market, as client companies start to separate their audit into separate elements, according to analysis from Source Global Research which suggests Deloitte is the front runner for embracing this change, says Accountancy Daily.
Its research found that a third of audit clients are breaking down their audit process into separate parts and that 44% are thinking about doing so. Furthermore, 45% say that this change will lead to more parts of audit work going to technology firms.
The two front-running technology firms in the eyes of audit clients are IBM (40%) and Accenture (18%). However, just over half (52%) of clients identified Deloitte as the audit firm best positioned to deliver the technology components of an audit, followed by KPMG (22%) and then EY (18%).
Source surveyed CEOs, CXOs, CFOs, and senior finance executives from a large number of organisations; 49% of these organisations employ more than 5,000 staff, 58% were audited by the Big Four, and 39% had worked with the same auditor for more than five years.
Fiona Czerniawska, director at Source Global Research, said: ‘If you assume that some parts of the audit process will require more technology, and more technology know-how, than others, then, provided an auditor retains control of some part of the process, it would be logical to turn to technology specialists.
‘In short, it’s clear that breaking the audit process down will significantly change the rules of engagement for traditional audit firms. This simple change creates opportunities for non-audit firms to become involved.’
Source also found that around two-thirds (64%) of audit clients expect their reliance on outside help to increase over the next decade. Just over a third (36%) said that this was because they would need to access more specialised skills, while almost a quarter (23%) said it was because they would need greater access to innovative new tools.
Source says this is something that is borne out by interviews it has carried out with audit clients, quoting a finance director who stated: ‘We’re looking to our auditors to give us tools that will help us carry out our own analysis.’
Czerniawska said: ‘Technology companies that might never have considered entering this market will be paying a lot of attention to the significant changes that our research has revealed are taking place right now in the audit market. When we consider the potential size of the new market that could be carved out of the existing one, it’s clear that this will be a huge opportunity for new entrants.’
The Challenger Audit Brand: Impossible or inevitable? is available here.
Report by Pat Sweet