The response letter focused on cloud computing, distributed ledger technology, data analytics and European supervision.
The letter focuses on the following issues:
- cloud computing: we need to form ‘intelligent buyers’ and address unjustified data localisation restrictions
- distributed ledger technology: a user-needs approach is best suited to look at applications for this promising technology
- boosting efficiency: FinTech could help reduce the compliance burden related to client due diligence
- data analytics: it can improve the audit quality, but also create a number of challenges. Regulators need to understand these issues and follow the innovations at the same pace as audit practices
- European supervision: ESAs should play a key role in ensuring consistency and common approaches to FinTech supervision across the EU.
Evolving technology has resulted in an increasing focus on data analytics, including in the field of audit. However, the journey is evolutionary and the data analytics audit is still a 'work-in-progress’.
Data analytics offer opportunities for auditors to obtain a more effective and robust understanding of the audited entity. For example, the use of data analytics might allow auditors to test 100 percent of transactions of a population. However, this does not imply that the auditor is able to provide more than reasonable assurance that the financial statements are free from material misstatements, or that the meaning of ‘reasonable assurance’ changes.
Moreover, the quality of a financial statement audit can be enhanced using data analytics. However, skilled and experienced auditors are a pre-requisite for data analytics to enhance audit quality. There is therefore a need to enhance the education and skillset of professional accountants and auditors as well as increase access to IT specialists (who also understand assurance needs).
This is equally valid for regulators’ skills, as they significantly influence how the audit practice develops. Therefore, they need to understand the issues and follow the innovations at the same pace as audit practices as well as encourage this innovation in order to progress audit quality.
Full response
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