How Automation is Reducing Audit Costs

Audit management solution providers have long posited that audit management technology reduces overall costs for businesses. The position has been recently reinforced in a recent Gartner study. The study reveals that businesses focused on audit control automation spent significantly lower on external audits. Businesses that had less than 25 automated controls in their audit framework spent an average of $1,233,143 while businesses that had 25 or more automated controls spent $900,510. This is a significant decrease – businesses with greater automation only spent 73.02% as much as businesses with lesser automation.

This raises two questions for businesses – how does audit automation reduce costs, and is the overall cost equation still beneficial for businesses that automate controls and audits?

How Control Automation Lowers Audit Costs

Working with an external auditor is necessary for businesses but can be a very costly process. Businesses want to ensure that their internal audit framework is sound. Managing risks and ensuring compliance is necessary for banks and financial institutions. External audits ensure that the auditors are not biased in any way and will approach all the data or information with the same vigilance and neutrality as regulatory bodies. The challenge is that it is difficult for external auditors to effectively perform external audits, which increases the amount of time required to complete the work. Since most external auditors are compensated by consulting hours spent, the extra time that is required directly results in increased costs.

The reason it takes external auditors so much time to complete the audit is because they are working in an external environment. The internal auditors of the organization are already aware of all the business processes and SOPs. They know where all the information is stored and who they can get in touch with if they need more information. The external auditors have no such advantage – they must first navigate the hierarchy and organizational culture and then focus on the audit itself.

This is where automated controls and audit management technology can help businesses enhance the external audit process. Instead of the required information being stored in different documents and spreadsheets, audit management solution store it in a central platform which can be accessed by the external auditors. The external auditors do not need to understand how the business works to perform their audits – they can get all the information they need for the audits from the audit management platform.

Automated internal controls also reduce the issues that often go undetected in an organization. If there is a compliance violation that is detected by the automated controls, the external auditors can easily see that the existing audit and compliance framework is working optimally and requires no corrective measures, which also significantly reduces both the duration and extent of the external audit.

The Audit Cost Equation

Audit automation changes the audit cost equation. It is becoming increasingly common in the financial sector because the costs of the technology itself are much lower than the benefits that it provides. Consider the statistic by Gartner, which showed estimated savings of more than $300,000 for businesses that automated 25 or more controls in their audit and compliance framework. This alone is a lot more than the cost of an audit management solution, but it is not the only benefit businesses can obtain from audit technology. These are just the savings on costs of external auditing. When the costs reduced in internal auditing and the costs borne due to compliance failures which will be reduced when the technology is implemented are tallied, the combined savings from audit management technology are substantially higher than the investment required to implement audit management technology.

There are numerous benefits besides the lower costs as well. Centralizing audit management enables enhanced audit insights for banks and financial institutions. Management can easily track all the audits and get information about any past, ongoing, or planned audit from the audit calendar built into the audit management solution. They can also review the findings of the audits and directly create tasks for corrective actions within the platform. This centralization of audit management enhances audit visibility, efficiency, and generates more business intelligence for strategic decisions.

Interested in seeing how your business can benefit from audit technology? Get in touch with our audit and compliance experts for a demonstration of the Predict360 solution which has been endorsed for risk and compliance management by the American Bankers Association (ABA).