When tech companies focus on their competitive market, they often forget to look at themselves.
“A recurring theme at tech companies is that there’s a need for speed in competitive product development, but lagging development for the operations team to support the company itself,” said Grant Thornton Technology Industry National Managing Partner Andrea Schulz.
“Audits are able to deploy automation solutions as long as the right technology exists in the client's ecosystem — but that’s often the barrier for using advanced technologies in an audit.”
Fast-changing tech companies can quickly outgrow their back-office finance functions, and that can restrain further growth and agility in many areas. It can also limit audit efficiency. “Audits are able to deploy automation solutions as long as the right technology exists in the client's ecosystem — but that’s often the barrier for using advanced technologies in an audit,” Schulz said. “Ironically, tech companies often have a high number of manual processes.”
Even without automation, an audit can help identify the manual processes that are holding a company back. As managers review audit results, deeper analysis can reveal important questions that they need to ask, like “Why are we posting manual entries? Is there a way to streamline our process?” Companies that are international or have grown through acquisition might find that they could benefit from centralizing accounting to ensure consistency.
For tech companies that are lagging in financial analysis centralization and technology, audit findings can provide a source of insight into underdeveloped areas and processes that need transformation — if leaders are willing to look.
Take a closer look
“Management often puts the audit in a silo, including the findings that come from the audit,” Schulz said. “They need to understand how the findings disseminate throughout their organization. The data they're providing for an audit can yield a number of insights, if you just pause and take a look.”
“By just doing that analysis of the data, you can see who the key vendors are, what they’re providing and where there might be duplications,” Schulz said. “A lot of tech companies have found, as they've been analyzing their costs, that different departments activated different software solutions which served a duplicative purpose.”
“The keen exec can connect the dots and understand if they're seeing more audit findings or questions in a certain area — they can take that back into their FP&A.”
“Go deeper on your findings,” Schulz said. “What was your approach to your accounts payable and accrual testing? Were there any insights that you gleaned from that testing?” While auditors cannot advise management on these insights, management can use the audit results to uncover important findings. “The keen executive can connect the dots and understand if they’re seeing more audit findings or questions in a certain area — they can take that back into their FP&A.”
It takes skill to connect the dots in your audit findings. Most leaders just try to identify problems by looking for anomalies — but anomalies aren’t always a negative. “Just because a transaction is an anomaly or outlier doesn't necessarily mean it's wrong or bad,” Schulz said. “It could be that someone on the sales team tried a different contract approach that was actually successful — or they’re dealing with a customer in a new vertical, or geography, and found a structure that resonated with the customer.”
Schulz recalled finding a pattern of transactions that revealed a unique contract structure was generating transactions the company typically didn’t see from clients. “It seemed to actually be gaining traction with a subsector where the company wanted to focus. That’s not common for an audit to triangulate and identify, but it shows the power of advanced audit technologies.” It’s just one of the examples where tech companies can benefit from unpacking their audits.
Audit insights from other industries
Revenue analytics
The best place to look for insight from your audit can often be in revenue analytics. Revenue analytics can zero in on outliers to assess risk and perform a closer examination where it’s needed. Revenue testing can go through revenue analytics to identify notable and non-notable transactions, which can be especially helpful for SaaS companies that want to take a closer look at revenue volatility. “Revenue in SaaS should be fairly predictable,” Schulz said. “A regression analysis can look through analytics to spot and understand where there's a spike in revenue that we wouldn't predict for a certain contract.”
“A lot of times, it's simply explained by other anomalies that occur in the technology industry,” Schulz said. “It's not typically an error or fraud, but it can just be a matter of understanding if there was a contract that was different than usual. Why was that?” Management can analyze these outliers to better understand what their customers need. “Many SaaS customers have been coming in and renegotiating contracts — we’re seeing some modifications due to further pricing pressure, where the list price is getting discounted further,” Schulz said. By analyzing transactions, managers can get a broader understanding of overall trends in demand and how the company might turn those into an advantage.
Emerging technology
“We're not to continuous auditing yet, but we're going to get there. We’ll have audits that are helping people uncover real-time insights on anomaly transactions”
Audit analysis can even reveal information about a company’s processes. With the growth of GenAI capabilities and adoption, auditors increasingly use AI to dynamically generate process analysis and empower their work in other areas. For example, Grant Thornton developed the GenAI tool CompliAI™ with Microsoft technology to help assess and identify potential control gaps in processes.
“We’re pushing toward an environment where you're not just going to have random samples on a full population,” Schulz said. “The audit will be homing in and testing the true risks in the population, so it's going to be a more effective and efficient audit. We're not to continuous auditing yet, but we're going to get there. We’ll have audits that are helping people uncover real-time insights on anomaly transactions.”
“A lot of people think audit anomalies are bad,” Schulz said. “Anomalies are just a deviation from what we would typically expect — but with tech companies, businesses change. Tech companies have to be agile, and that can be a way to uncover new questions about certain outliers.”
Tech companies need to innovate, and that can lead to variations from the norm. Make sure that you understand both what’s wrong and what’s right — understand your anomalies.
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