The practicalities of technological developments
David Wood explains why ICAS has formed a Technology Advisory Group and some of the key issues it is discussing.
Balancing regulation
Like many new developments and inventions over the long course of history, new technologies can be put to both positive and negative uses. Inevitably, some form of regulation needs to be introduced to prevent misuse – but it needs to be such that it doesn’t stifle the innovation and prevent the propensity to do good. Sometimes the ‘pause’ button needs to be pressed to allow time for the issues which new developments present to be properly considered.
The Financial Times Editorial Panel on 21 January highlighted the debate over facial recognition technology. Clearly facial recognition can allow governments and law enforcement authorities to identify and track down individuals but there are different implications if this is used to persecute minorities rather than catch criminals.
EU regulators and Sundai Pichai, chief executive of Alphabet, have raised the issue of a temporary moratorium on facial recognition technology, so that regulators can assess its impact and identify the risks.
The ICAS Technology Advisory Group has identified regulation as a key issue in the development of technology which affects business and the profession. It is key that regulation is proportionate and enables rather than stifles technological change. But, in the public interest, it also needs to anticipate and prevent any negative consequences that the technology might otherwise cause.
The Technology Advisory Group
Advancements in technology are likely to lead to dramatic change in the profession within the next ten years. A Technology Advisory Group has been formed to advise ICAS on technology related matters. This includes how ICAS can influence regulators and standard setters, and shape the future of the profession. The groups also help us to inform and assist members in understanding and taking advantage of the opportunities presented by future technological developments.
Key for ICAS members is how technology can be used to make business operations more efficient, and improve customer service. Technology is also enabling new business models which disrupt and potentially replace existing businesses in providing new and enhanced services to customers. Some further perspectives which have been discussed by the group are set out below.
The nature of technological change
At one level, the issues today are the same as they were twenty years ago. Key for all organisations is deciding which is the right / best technology to use, getting the software to do what it promises to do, and the stability and continuity of the software supplier so that the technology will be supported over time. Of course, many are now sourcing their software applications from cloud service providers which brings many advantages but new risks.
To really embrace and capitalise on new technology, many businesses are likely to need a big investment. This can sometimes involve taking a gamble on whether they invest in the right technology which does not become obsolete (with VHS and Betamax the obvious, but now rather out of date, examples). Certainly, it can be hugely disruptive to a business if the software provider fails and becomes insolvent.
Therefore, whilst the nature of the technology might have changed, some of the key issues haven’t. However, there seems to be a much greater appetite today for doing things differently with new and different software but the challenge of these new software businesses still being around in ten years’ time remains.
Small steps and big changes
We need to recognise small changes as well as big developments in technology, as all can affect the way we work. The widespread use of artificial intelligence (AI) may be some time in the future, but we need to be aware of the smaller changes constantly taking place including increasing robotic process automation, and gradual AI augmentation of business processes and customer service provision.
A key component for maximising the beneficial use of technology is data. Some of the key issues for business are the quality of the data they have, how to go about collecting the data they really need, and ensuring the quality and reliability of that data. Critical also are data management and protection, and the speed of processing. The rise of the importance of data, and the control, management and processing of that data, is also a key issue for companies’ internal audit departments.
Onshore vs offshore
With the increased accessibility of digital analytics tools, it is becoming easier to run these onshore rather than setting them up offshore as in the recent past. Such onshoring may just mean having greater control over the processing, which may still be done in a remote location but not by a third party. This makes the costs and service benefits more accessible to small- and medium-sized businesses and practices, though there may be a challenge in training up practitioners to run these analytics themselves. Key in using analytics is often reconciling the input to the input data and the output to the output data.
There is a sense that offshoring is unlikely to last beyond the medium term, except for large-scale centralised global operations. Businesses are increasingly likely to run their own data centres in-house where there is better understanding of the business and market contexts. New onshore skills will therefore be needed, again requiring education and training.
Data analytics and audit
In large and medium-sized audit firms, we understand that the analysis of data is still often undertaken by the firm’s data analysis experts on behalf of the audit teams, but the audit teams can then find it a challenge to deal with the results. Though this is changing over time, there would seem to be a need for continuing integration so that the audit teams can run the data analytics themselves and better understand and action the results.
There is also an ongoing issue of whether audit regulators accept the use of analytics; current auditing standards do not anticipate the use of data analytics and are not keeping up with the pace of change.
The implementation of Sir Donald Brydon’s recommendations on improving audit quality and effectiveness will certainly impact on the context for the application of data analytics in the UK; this is likely to be an area of continuous evolution and adaptation.
Infrastructure
5G promises a great leap forward in connectivity and the ability to use new technologies. Key to the collection of quality data, the interconnection of society, and the ‘internet of things’, though, is comprehensive, reliable and resilient infrastructure.
Does the government really understand this need for core infrastructure? Certainly government leadership and funding will be critical in getting this in place. With proper networks and connections, business could become geography agnostic, enabling some of the remoter regions of the UK to fully embrace the new opportunities.
In-built cybersecurity will be key to the resilience of the infrastructure, given the ongoing risks and increasing potential impacts of a cyber-attack. Similarly, knowing your supply chain and the risks which might lie within it, can be crucial.
If you would like to comment on the above or contribute to ICAS’ work on technology more generally, please contact David Wood at ICAS (dwood@icas.com).
You can also share your experiences of technology more broadly with members through CA Connect.