WORLD ACADEMY OF INFORMATICS AND MANAGEMENT SCIENCES
ISSN : 2278-1315
financial reporting, these opportunities are not risk-free. To
WAIMS TRIBUTE TO KOFI A. ANNAN
the extent these technologies impact financial reporting, audit
In Tribute of KOFI A Annan and His Contribution towards
committees play an important oversight role in how
Betterment of Human Kind Globally, Family of World
companies manage the related financial reporting risk. Audit
Academic of Informatics and Management Science and
committees should engage with management to determine
Board of WAIMS Academic Press
whether endeavors in emerging technologies are aligned with
the company’s emerging technology strategy regarding
financial reporting. The Center for Audit Quality (CAQ) has
developed this tool to help audit committees execute their
oversight responsibilities for financial reporting impacted by
emerging technologies. Leveraging the work of the
Committee of Sponsoring Organizations of the Treadway
Commission (COSO), this tool provides a framework for
conducting effective oversight of a company’s use of
emerging technologies in the financial reporting process. As
explored in greater detail below, this framework has five key
components:
i.
Control Environment
ii.
Risk Assessment
iii.
Control Activities
iv.
Information and Communication
v.
Monitoring
In addition to this five-part framework, the tool highlights two
EMERGING TECHNOLOGIES
technologies; artificial intelligence and robotic process
automation which, unlike the current state of blockchain
AN OVERSIGHT TOOL FOR AUDIT COMMITTEE
technology, are more widely used in the marketplace. Finally,
Center for Audit Quality (CAQ)
the tool includes questions within each of the five components
Abstract
that audit committees may ask management and auditors to
Emerging technologies, such as artificial intelligence (AI),
help inform their oversight of financial reporting.
robotic process automation (RPA), drones, and blockchain,
are changing how business gets done. Although emerging
OVERSIGHT FRAMEWORK FOR AUDIT COMMITTEES
technologies present opportunities to increase efficiency and
the quality of financial reporting, these opportunities are not
Audit committees, working collaboratively with the entire
risk-free. In response to the changing business ecosystem,
board and management, play a key role in monitoring the
the Center for Audit Quality (CAQ) has developed tools to
system of internal control, taking into account emerging
help
audit
committees
execute
their
oversight
technologies. That is true whether the emerging technology
responsibilities for financial reporting impacted by
project results in:
emerging technologies. As explored in greater detail in the
i.
A change in the company’s products and services,
paper, the framework has five key components; Control
ii.
A change in internal enterprise resource planning
Environment, Risk Assessment, Control Activities,
(ERP) systems, or
Information and Communication and Monitoring. In
iii.
The use of outside providers of technology and
addition to this five-part framework, the tool highlights two
technology services.
technologies; artificial intelligence and robotic process
Audit committees of the board of directors have an oversight
automation which, unlike the current state of blockchain
responsibility related to the company’s financial reporting
technology, are more widely used in the marketplace. The
process. As a result, management and directors have a vital
tool includes questions within each of the five components
interest in whether the quality of the company’s books and
that audit committees may ask management and auditors to
records and related internal accounting controls enable them
help inform their oversight of financial reporting. Hence, an
to address their responsibilities adequately. This would
understanding of these emerging technologies and
include having an interest in understanding the potential risks
awareness of the opportunities and risks they present is
to financial reporting objectives that may be associated with
essential for audit committees to discharge their oversight
emerging technologies.
responsibilities.
The following five-part framework, which leverages COSO’s
Internal Control – Integrated Framework, may help audit
INTRODUCTION
committees advance their oversight of and involvement with
emerging technologies used in financial reporting. Under each
Emerging technologies, such as artificial intelligence (AI),
component of the framework are questions audit committees
robotic process automation (RPA), drones, and blockchain,
can ask management to fulfill their oversight responsibilities.
are changing how business gets done. One study estimates
The questions are not intended to be exhaustive.
that almost half of all finance tasks in corporate finance
departments will be automated by 2021, up from 34 percent
COMPANY’S EMERGING TECHNOLOGY STRATEGY
today.
Although
emerging
technologies
present
The control environment is the set of standards, structures,
opportunities to increase efficiency and the quality of
and processes that provide the foundation for carrying out
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