In the world of auditing, professionals are no strangers to an array of difficult challenges that can sometimes significantly impact their efficiency and accuracy. The journey begins with a limited view of a client’s entire financial transaction history, frequently resulting in a laborious process of obtaining further transaction details at a speed more appropriate for an earlier period. Adding to the complexity, data from various banks arrives in inconsistent formats, demanding valuable time for accurate reformatting. The process of obtaining transaction details is often a burden placed on clients, and it may unintentionally create risks of fraud or tampering. And the list can continue.

Amid these complexities, there is a strong need for efficient, safe, and creative auditing procedures that can successfully navigate these difficulties. Luckily, open banking can be a beacon of hope, offering tailored solutions that address the intricate challenges auditors face, becoming the key to unlocking efficiency, accuracy, and trust in the auditing process. 

So, how does open banking benefit audit companies and auditors? Let’s explore some of its key advantages.

A safeguard against fraud

Based on a
research, the fraud detection and prevention market is expected to reach $252.7 billion by 2032 at a 24.3% CAGR. However, the process is still unstable. Uncovering financial fraud and irregularities often requires meticulous examination of vast amounts of transaction data. Besides the traditional auditing method, which is time-consuming, there are many risks associated with detecting fraud. One such risk is the possibility of fraudulent identity theft, by which false identities could be used to falsify financial reports and misrepresent the state of the business’s financial health. In addition, auditors frequently work with paper bank statements, which raises the possibility that they will overlook fraud occurring in real-time. 

Leveraging open banking, audit companies get instant access to clients’ data. This possibility enables auditors to easily detect any discrepancies, unusual transactions, or suspicious patterns, allowing them to take immediate action to mitigate the risks of fraud.

Real-time financial data access

Accurate and current insights are difficult to deliver to clients in the traditional auditing process,  as auditors frequently rely on outdated data. With the help of open banking solutions, auditors can obtain real-time financial data, guaranteeing access to the most recent information. Furthermore, the ability for audit firms to access unified financial data from various banks improves risk detection, automates testing, and facilitates the analysis of anomalies and trends.

Streamlined audit processes

Manual data entry and reconciliation are prone to human errors, which can compromise the integrity of audit reports and processes. Additionally, auditors must solicit businesses to submit bank extracts in CSV and Excel formats. These extracts may contain inconsistent data, necessitating time-consuming reformatting for reports and possibly requiring work with paper bank transactions, which significantly slows the process. Open banking streamlines the audit process by automating data collection and analysis. This way, auditors no longer need to rely on manual data extraction from multiple sources, reducing the time and effort required for audits. 

Data transparency and control

A
research done by the Federal Trade Commission identified that in 2022, the total fraud losses were $9.0 billion, meaning 1 in 5 people lost money due to scams of fraud identity. Considering these huge numbers, there is no doubt that, on the other side, clients are afraid to share their financial information, and auditors face the risk of modified data and fake identities collected from clients. Among these complexities, open banking is the answer to these problems. Open banking is secure due to strict regulations that require financial institutions to implement robust security measures. These regulations mandate strong authentication methods, data encryption, and secure APIs to protect customer data. Clients can not only confidently share their data with third parties but also have better transparency and control over who accesses their financial data and for what purpose.

Extra advisory services

Access to account information via open banking not only simplifies audit procedures but also gives auditors the ability to provide advisory and consulting services. Real-time transactions that are transformed into actionable insights enable auditors to quickly spot new trends and possible irregularities. Through open banking solutions, auditors can act as trusted advisors, helping clients make informed financial decisions and mitigate risks.

Closing thoughts

Encouragingly, auditing procedures need to be safe, innovative, and efficient in order to successfully navigate the challenges that auditors face. With all the above-mentioned pain points of auditors, open banking comes as a ray of hope, ensuring a solution that simplifies the overall processes and secures data sharing among audit companies and their clients.

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• Source: https://www.finextra.com/blogposting/25288/open-bankings-transformative-benefits-for-the-audit-industry?utm_medium=rssfinextra&utm_source=finextrablogs