Audits are invasive. They require the due diligence of a human auditor, and software will never eliminate expert involvement.
Now. I’m not denying that software can streamline, optimize, and even transform the audit process. The right applications can and should accomplish all of this.
The question is how.
Two competing models govern modern financial systems, and vendors on both sides have claimed to solve the audit dilemma.
On one hand, the unified model manages as many financial processes as possible in one application. The best unified solutions dedicate a user role to auditors, giving them remote access into the organization’s finances. This makes it possible for audits to take place intermittently throughout the year.
On the other hand, a best-of-breed approach depends on integrations to connect multiple stand-alone modules. In a top-tier best-of-breed system, auditors receive access both to integrated reports and to the component modules. Most best-of-breed audits are conducted in-person and on traditional schedules.
The best unified solutions dedicate a user role to auditors, giving them remote access into the organization’s finances. This makes it possible for audits to take place intermittently throughout the year.
Pros and cons exist on either side.
Perhaps the way forward lies in what philosophers call a thought experiment: imagining how an external audit would work in each model.
Consider two companies, Aluminum Holdings and Steel Incorporated.
Process
At Aluminum holdings, auditors have access to a fully integrated financial management system that provides browser access to its reporting and inquiry function. Auditors can consult digital records, browse logs, and drill down to PDF versions of transaction receipts.
By contrast, the best-case scenario has the auditors of Steel Inc. pulling from multiple stand-alone applications. Unreliable integrations will often force auditors to verify each source in a patchwork of spreadsheets.
Behavior tracking
The unified financial software at Aluminum gives auditors an auto-generated audit trail tying the responsible users to each transaction. This behavior tracking comes paired with advanced BI tools, allowing for agile investigation into any balance.
Steel Inc. forces auditors to integrate incomplete audit trails from between three and 10 different systems. In order to find out who’s responsible for any given transaction, auditors must either consult separate records or go back and forth between departments.
Timing
Aluminum’s audit will move more quickly than that of Steel Inc. As CPA Espen Jansen estimates, a financial solution like Xledger slims audits to anywhere between one half and one tenth of the time required for a traditional process.
On the other hand, Steel Inc. can expect anywhere from two weeks to four months.
Cost
Compared to Steel Inc., Aluminum’s audit will likely save thousands of dollars. But its greatest savings will elude measurement. By equipping itself and its auditors with modern finance functionality, Aluminum has pushed toward an elusive goal: peace of mind. With the right software, Aluminum can identify problems and enforce internal controls long before auditors even arrive, making the audit process as smooth and painless as possible.
Unfortunately, Steel Inc. will continue to bear the full brunt of audit-season costs, monetary and psychological.
As audit season intensifies, millions of organizations will settle in for a long grind.
Yet many have already taken action to change the cycle.
Take Cure International as an example. With $70+ million in revenue, CURE is the world’s largest by-volume provider of pediatric surgery. Most of CURE’s efforts focus on eliminating easily corrected birth defects in developing nations.
Before Xledger, CURE had trouble making decisions, let alone weathering audits, with financial reporting that took up to six weeks from sites in several third-world countries.
Xledger eradicated this barrier. Now, CURE reports expanded surgical capacity, real-time financial insight, and a transformed decision-making process.
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Xledger empowers 10,000+ customers in 50+ countries with the market’s most automated cloud finance solution. We equip internal auditors with a fully-unified system of reference, end-to-end event records, and market-leading BI tools. Xledger’s robust solution and dedicated customer service have won us an industry-leading 98% customer retention rate.
Please get in touch for more information about how Xledger can transform your audits.