A paperless audit is when an auditor accesses the electronic records of a client in order to conduct an audit. Ideally, it also means that the auditor issues a final report in an electronic format, such as by e-mail or by posting the information on a secure site for downloading by a client.
A paperless audit can result in reduced costs for both parties, for the following reasons:
- Analysis software. Depending on the format in which the client information is provided, the auditor may be able to use analysis software to automatically review the information.
- Error reduction. There is no rekeying of information from client documents into the auditor's software, so rekeying errors are eliminated.
- Travel costs. The auditor can conduct audits from a remote location, so travel costs are eliminated.
- Turnaround time. Given the use of automated analysis tools, a paperless audit can result in faster turnaround time, which can be useful when a third party is demanding audited financial statements as soon as possible.
- Workflow management. The auditor can more easily see the status of all aspects of an audit, in terms of percentages of completion, bottlenecks, and so forth, and so can bring resources to bear on any issues that are holding up completion of the audit.
- Worksheet templates. The auditor can issue electronic templates of worksheets for the client to fill out that are based on the electronic records from the last audit.
In short, the paperless audit is effective in eliminating rekeying and travel costs, while speeding up the analysis of information and monitoring the completion stages of an audit.
Despite its advantages, there are several downsides to the use of a paperless audit, which are:
- Security. Some of the information provided to auditors is considered confidential, and storing it outside of the client location (i.e., on the auditor's computer) increases the risk that it will be accessed by an unauthorized party.
- Cost. If a client currently keeps some or all of its financial records on paper, converting to an electronic storage format can be expensive.
In most cases, the advantages of a paperless audit seriously outweigh any offsetting issues. At a minimum, any business should consider shifting as much audit work as possible to a paperless solution.