Regulatory and technological developments are changing the nature of financial markets, services and institutions in ways completely unexpected prior to the 2008 Global Financial Crisis

1. PIOB June 30, 2017: The Impact of Technology on Audit
Presented by:
Liv Apneseth Watson, Workiva, Inc

2. PIOB June 30, 2017: The Impact of Technology on Audit
Today's Agenda
• Drivers for innovation in Audit and Financial Reporting
• The Impact of Information Technology on Audit
• Innovation in RegTech
• Call to Action
• Questions and Open Discussion

3. PIOB June 30, 2017: The Impact of Technology on Audit
About Workiva, Inc.

4. PIOB June 30, 2017: The Impact of Technology on Audit
Drivers for
Innovation in
Audit and
Financial
Reporting
The Pressure to Adapt

5. PIOB June 30, 2017: The Impact of Technology on Audit
Deliver a more Relevant Audit - Current State
• IDC estimates that by 2020,business transactions on the internet- business-to-
business and business-to-consumer – will reach 450 billion per day.
• IDC estimates, the volume of business data worldwide, across all companies, doubles
every 1.2 years.
• Walmart handles more than 1 million customer transactions every hour, which is
imported into databases estimated to contain more than 2.5 petabytes of data.
• The largest AT&T database boasts titles including the largest volume of data in one
unique database (312 terabytes) and the second largest number of rows in a unique
database (1.9 trillion), which comprises AT&T’s extensive calling records.
• IDC estimates that poor data can cost businesses 20%–35% of their operating
revenue. Source: www.waterfordtechnologies.com/big-data-interesting-facts/

6. PIOB June 30, 2017: The Impact of Technology on Audit
A Fragmented Regulatory Structure: Current State
Businesses report
the same
information in
multiple formats to
multiple agencies.
Agencies create
duplicate standards
to collect the same
information from
regulated entities.
U.S.A. Sample of Complexity

7. PIOB June 30, 2017: The Impact of Technology on Audit
The costs keep growing, while its complexity is starting to out-pace human understanding.
Compliance Costs: Current State

8. PIOB June 30, 2017: The Impact of Technology on Audit
• Audit firms are subject to a
statutory obligation to ensure
that its auditors comply with the
professional standards .
• Audits inspected by regulators
included such shortcomings that
the auditor failed to obtain
sufficient and appropriate audit
evidence in order to support the
issued auditor’s opinion.
Statutory Inspection Fines: Current State

9. PIOB June 30, 2017: The Impact of Technology on Audit
Audit Costs: USA Current State
▪ 95% of small companies spend less
than $500k on SOX compliance
annually.
▪ 58% of large companies spend more
than $1 million on SOX compliance
annually
▪ 25% of large companies spend more
than $2 million annually.
▪ 85% of companies overall said that
external auditors relied on internal
testing for non-critical controls
Source: © 2016 Forrester Research, Inc.

10. The costs keep growing,
while complexity is starting
to out-pace human
understanding.

11. PIOB June 30, 2017: The Impact of Technology on Audit
The Impact of
Information
Technology
on Audit

12. PIOB June 30, 2017: The Impact of Technology on Audit
Business Processes
Hire to
Retire
Order to
Cash
Procure to
Pay
T & E
P-Card
Programs
General
Ledge
Event Monitoring
Configurable Rules Engine
Monitoring Conditions,
Variables, Events, Dynamic
Correlation, Audit Analytics ,
False Positive Filtering......
Process Mining
Project
Multidimensional
Audit Data
Selection (MADS)
Innovation
Visualization
ERP
Legacy
Applications
Procurement
Applications
Inventory
Applications
Asset
Management
Applications
Other.....
Financial
Close
Process
Regulators
i.e. 10K , 10Q,
20F or 40F
Annual Reports
Current RegTech State
Application Landscape
XBRL
Standards

13. Assume that all data will be
consumed using an electronic
machine understandable reporting
framework rather than a
document-based digital one.

14. When Complexity is Starting to Out-Pace Human Understanding
Welcome to
RegTech

15. PIOB June 30, 2017: The Impact of Technology on Audit
RegTech is about process
automation’, such as
improving inefficiencies
within regulatory reporting
processes and using
technology to ease the
burden of compliance with
improve internal controls.
RegTech

17. PIOB June 30, 2017: The Impact of Technology on Audit
RegTech
RegTech Firms
Source: www.regtechireland.ie

18. PIOB June 30, 2017: The Impact of Technology on Audit

19. PIOB June 30, 2017: The Impact of Technology on Audit

20. PIOB June 30, 2017: The Impact of Technology on Audit
RegTech Only Collaborative Achievable
AUDIT
TECHNOLOGY
VENDORS
20
DATA
DEDINITION
STANDARD
SETTERS

21. PIOB June 30, 2017: The Impact of Technology on Audit
RegTech Domain PrioritiesCollaborativeAchievability
Imperative of Getting RegTech to MarketLow
LowHigh
High
# Solvency II
# CCAR
# CRR
# Anacredit
Risk Reporting # Record Keeping
# BCBS 239
# ABC
# SMR
Controls
Robo Rulebooks
# Codified Authorization
Conduct
# Trade Surveillance
# Conflicts
# Sanctions
# FAMR
# Benchmarks
Reporting
Investor Protection
# Classification
# Client/Product
Management
# Trade and
transaction reporting
# Best execution
# SARs
# STORs
Reference Model
Audit Automation
# Predictive Analytics
# Continues Auditing &
Monitoring
# Standard Audit Data
Model
# Decision models
# Common domains
# Reference data
# Data dictionary (i.e. taxonomies)
Smart Contacts
# Collateral
# OTC controls
DLT Transaction
# Collateral
# OTC controls

22. Increased Productivity from Human-Machine
Collaboration
Advances in technology are
fundamentally changing the
nature of the audit.

23. PIOB June 30, 2017: The Impact of Technology on Audit
“I skate to where the puck is going to be, not where it has been.”
Wayne Gretzky, legendary Canadian hockey star
Call To Action

24. Call to Action
• Establish an Audit Standards Codification Project and Integrate
standards codification as a discipline of audit standards setting.
• Support the development of a single repository governing all
regulatory XBRL Taxonomies to ensure data harmonization by
reducing the compliance cost of issuers.
• Take an active role in reviewing regulated taxonomies.
• Take an active role in fostering innovation

25. PIOB June 30, 2017: The Impact of Technology on Audit
Title Publication URL
Why LEI should be in your vocabulary Workiva, Inc - Online Blog www.workiva.com/blog/why-lei-should-be-your-vocabulary
Get Ready For Blockchain Strategic Finance http://sfmagazine.com/post-entry/january-2017-get-ready-for-blockchain/
New Format and Technology Drives Enhanced
Business Reporting Whitepaper https://www.slideshare.net/livapnesethwatson/cartesis-whitepaper-xbrl-
bob-eccles-liv-watson-copy
Integrated Reporting Requires Integrated Assurance
Eccles, Robert G., Michael P. Krzus, and Liv A.
Watson. ,Key Developments in Practice and
Procedures, edited by Joe Oringel, 161–178.
London: Bloomsbury Information Ltd., 2012.
http://www.financepractitioner.com/auditing-best-practice/integrated-
reporting-requires-integrated-assurance?
page=1&action=recommended&id=-43403&recommendedArticleType=libri
os
The Integrated Reporting Movement; Meaning;
Momentum, Motives and Materiality
John Wiley & Sons
http://www.roberteccles.com/en/
#ag__menu_index__P__php__W__pic__E__off__A__agnews__E__437__A__menuk
s__E__402
XBRL for Dummies John Wiley & Sons https://www.amazon.co.uk/XBRL-Dummies-Charles-Hoffman/
dp/0470499796
Enhancing Capital Markets Transparency and Trust MediaTenor https://www.slideshare.net/livapnesethwatson/enhancing-capital-markets-
transparency-and-trust-davos-2010-l-watson-2-2
How XBRL Will Dramatically Improve Reporting and
Control Processes
Eccles, Robert G., Liv Watson, and Mike Willis. "."
Chap. 25 in Governance, Risk and Compliance
Handbook, edited by Anthony Tarantino, 353–365.
John Wiley & Sons, 2008.
https://www.slideshare.net/livapnesethwatson/how-xbrl-will-dramatically-
improve-reporting-and-control-processes
"Here Comes XBRL."
Eccles, Robert G., Jr., Liv A. Watson, and Mike
Willis. "Here Comes XBRL." Harvard Business
Review 85, no. 2 (February 2007): 33–34.
http://www.hbs.edu/faculty/Pages/item.aspx?num=31107
Sample Publications by Liv Apneseth Watson, Workiva, Inc.