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AGIA Annual National Convention 2019 | October 9, 2019

Use of Virtual Reality in Auditing

Document Description:

This is the companion document of the topic “Use of Virtual Reality in Auditing” presented by the
speaker during the Annual National Convention of Association of Government internal Auditors with
theme “Internal Audit Resilience and Accountable Governance, Six Decades After” held October 9, 2019
at the Waterfront Hotel, Cebu.

Topic Summary

The terms Virtual Reality and Augmented Reality (VR/AR)are now the latest buzzword in the Information
Technology world, not just in the gaming industry but also in construction, healthcare and research.
VR/AR can extend to the Internal Audit profession as in might be used to simulate scenarios particularly
in situations where the internal auditors cannot go to the actual site. This talk will discuss the use of
virtual reality / augmented reality in internal audits, and how will it change the dynamics of the
profession.

About the Speaker

Solomon Anastacio or Sol has almost 30 years of Information Technology -related experience in an
Electric Utility company. With expertise on IT Governance, IT Systems Management and Administration,
IT Project Management, Information Security Management, IT Auditing and Information Risk
Management.

He is a graduate of BS Computer Science from University of the Philippines Los Banos (UPLB). And holder
of internationally renowned designations: Certified Information Systems Auditor (CISA) and Certified
Information Security Manager (CISM) from ISACA, Certified ISO 22301 (BCMS) Lead Implementer and
Certified ISO 31000 Risk Manager, both from PECB.

Sol is an active member and officer of several prestigious professional associations in the Philippines
such as Institute of Internal Auditors (IIA) – Philippines Chapter where he is now the Chairperson of the
Technology Committee; Information Systems Audit and Control Association (ISACA) – Manila Chapter
where he was a Past President and was a member of the Board, and Project Management Institute
(PMI) – Philippines Chapter where he is now a member of the Board.

Disclaimer:

The author observed due diligence in acknowledging the source of information, including images, used
during the presentation and in this companion document. It is not the intention of the author to infringe
on the intellectual property of the authors and owners of information and photographs used in this
document.

Further, the views and opinion expressed by the speaker/author during the event and in this document
are those of the author based on his knowledge and experience. They do not necessarily reflect the
views and opinion of his employer, Meralco, nor the organizers of this event: the Association of
Government Internal Auditor (AGIA).

Prepared by : Solomon B. Anastacio, CISA, CISM

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AGIA Annual National Convention 2019 | October 9, 2019
Use of Virtual Reality in Auditing

What is Virtual Reality/Augmented Reality?

The terms Virtual Reality and Augmented Reality are now the latest buzzword, however the concept nor
technology is not new.

In 1962, Morton Heilig introduced the Sensorama,

a machine that implement immersive, multi-
sensory technology. Sensorama is considered the
cinema of the future at that time. Heilig produced
5 films that can be watched through the
Sensorama in 3 dimensional or 3D. And not just
watch, but also feel the wind, the vibration, and
yes, even smell. The films produced by Heilig for
Sensorama feature ride-based experiences such as
helicopter, go cart and motorbike. It is similar to
the 3D machines that we currently have in those
entertainment or game centers.

Image : Sensorama Machine by Morton

Heilig
Source: https://www.vrs.org.uk/virtual-
reality/history.html

The first to be considered head mounted display (HMD) system for VR, that used computer rather than
camera, is the SWORD OF DAMOCLES, created in 1968 by Ivan Sutherland and Bob Sproull. Why sword
of democles? The HMD is too big and heavy that it has to be supported by a pole from the ceiling. And
one major accident, the pole can fall on the user. These innovations while technically successful, they
are not commercially successful and available because of the cost of production. During that time,
however, the technology was too expensive to be sustained or recovered by coins and will not be
attractive to kids if it will cost a dollar or more per ride.

Image : Sword of Damocles

source:
https://www.vrs.org.uk/virtua
l-reality/history.html

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Use of Virtual Reality in Auditing

In the 1990s, the cost of producing VR reality

gaming drastically reduces that developers were
able to produce virtual arcade machines that
are already reasonable for gamers.

Image : Virtual Arcade Machine

source: https://www.vrs.org.uk/virtual-
reality/history.html

Still, these virtual arcade machines are not for mass productions and ordinary persons will not be able to
afford to buy one for themselves.

One of the first commercially available and mass-produced VR product is what we called View Master.

Images : View Master Model G

released in 1962 and reel
source:
https://en.wikipedia.org/wiki/
View-Master

And with the introduction of light-weight computers with calling capability that we now called smart
phones, VR can now be more accessible with the use of products such as Google Cardboard or VR Boxes.

Images : Google Cardboard

and VR Box
source:
http:s://www.amazon.com

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Use of Virtual Reality in Auditing

So what is Virtual Reality? In virtual reality, the user is being transported to a virtual world, out of the
current world that user is in. So technically speaking, all computer games particularly those RPGs or role-
playing games such as Warcraft, Starcraft, and even Counter-Strike.

Although today, VR is being referred with the use of goggle on which the users are completely immersed
into the virtual world. They do not know what happening in the real world. Remember the movies Ready
Player One and the Matrix? Those are completely VR as the users, Wade and Neo, were no longer aware
of what is happening on the real world, what danger their physical bodies are in.

Image : Ready Player One screencap

source:
https://variety.com/2018/digital/news/
ready-player-one-vr-tech-1202739419/

Augmented reality, on the other hand, does not transport the user to another world. It uses the existing
world or environment on which the user is in. It is just being enhanced by incorporating computer
generated graphics and information. Pokemon GO is one of an example of an augmented reality game.
You have to be physically go the park, or building to be able to capture pokemons, spin the pokestop, or
battle in a gym. The pokestops and gyms are not real, they are just incorporated by the computer in the
environment.

Image : Pokemon Go
screencap
source:
http://zugara.com/poke
mon-go-is-driving-
augmented-reality-and-
geolocation-adoption

In Augmented Reality or AR, the users are very much aware of the whats happening in the real world
even with goggles. After all, there will be nothing to augment if the real world is present.

Prepared by : Solomon B. Anastacio, CISA, CISM

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AGIA Annual National Convention 2019 | October 9, 2019
Use of Virtual Reality in Auditing

A new term was coined as the next buzzword in the VR/AR, the Mixed Reality. This is actually just an
extension of Augmented Reality wherein more information and better visualization are being provided
to the user. In the traditional AR, the user might be seeing a virtual ball on the floor. User will not be
able to “bounce” that ball on the floor as what you will see is a ball “floating” on air. In Mixed Reality,
the system will be able to bounce the ball on the floor. And if your physical reality has a table, you can
bounce the virtual ball on top of the table or hide the ball under the table. The virtual world is
integrated with the physical world.

Image : Mixed Reality using

Microsoft HoloLens
source:
https://www.microsoft.com/en-
us/hololens/apps

Some of you might have experience the Transformers: The

3D Ride or the Harry Potter Ride at the Universal Studios.
These can be considered MR rides. The platform on which
you are seated are mounted on a track. It provides with
the real forward, back and side motions. The screens
around you with the 3D glasses allow you to see the
virtual environment. In one of the segments of the Harry
Potter ride, you will experience as if you riding a
broomstick and travelling downwards and fast. In reality,
you are just suspended facing downwards, just a couple of
feet above the ground. The screen, and with the help of
some effects like fans to provide the wind, is telling your
brain that you are indeed riding a broom and flying. BTW,
in the Harry Potter Ride, there is no need for the 3D Image : Harry Potter Ride
glasses. source:
https://www.universalstudioshollyw
ood.com/things-to-do/rides-and-
Microsoft Hololens allows the user to control the virtual attractions/harry-potter-and-the-
environment by just using the hands, without any other forbidden-journey/
devices. You just need the headset to be able to control
the virtual environment.

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Use of Virtual Reality in Auditing

Some VR technologies require other devices to control the virtual environment and enhance the
experience. In movie Ready Player One, the protagonist Wade Watts has other devices: the suit, the
gloves, and even the platform to allow them to actually walk or run.

How Organizations are using VR/AR in their business operations

We have been talking about VR/AR and MR from the gaming and entertainment perspective. Well,
whether we like it or not, gaming and entertainment are still the leading users of the VR technologies.
But that is changing real fast. There is an increasing number of organizations and companies that are
using VR technologies in their businesses.

As predicted by Mortin Heilig in 1962, a number of companies are already using virtual reality /
Augmented Reality in their business, most are in the showcasing their business, marketing, education
and training disciplines. They are being used in a number of industries already like construction, project
management, medicine & health, information technology and of course, the gaming industry.

Military is one of the early adopters of VR with flight simulators, battlefield simulation, vehicle
operations, weapons use and operations. VR provides the military with safer and cheaper ways of
training the soldiers.

Image : Virtual Reality in Military

source: https://www.vrs.org.uk/virtual-reality-military/

Using VR Object recognition technology, auto mechanics can see the details or information about the
car part as the mechanic “look” at that part. Remember, Ironman, his helmet can detect objects and
identify those objects. An using AR/MR technologies, they can also “take” that part, study it by rotating
the part, flipping it,

Prepared by : Solomon B. Anastacio, CISA, CISM

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AGIA Annual National Convention 2019 | October 9, 2019
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Image : Virtual Reality in Automotive Industry

source: https://www.microsoft.com/en-us/hololens/apps

Let us take construction and engineering industry for example. The two dimensional floor plans of the
building can now be created in 3D and in Augmented Reality and even Mixed Reality. The client will now
have the capability to see the exterior and interior of a building even during the design stage. The
architect and the civil engineers do not have to create a physical, miniature model of the building for the
client to appreciate the design and functionality of the proposed building.

Interior decorators and space planners can create models of the room with the virtual tables and
furniture. They can move the virtual furniture around, replace them with bigger or smaller pieces to
meet the requirements. They might be able to see the holograms in real colors, change the colors of the
walls to see if they will match the furniture and vice-versa.

Image : Virtual Reality in Space Planning

source: https://www.microsoft.com/en-
us/hololens/apps

Engineers and innovators can use VR technologies to create new products before creating the actual
prototype. This new approach will save them money and resources instead of creating actual
prototypes. The chance of failures decreases as the errors can be found early in the design process.

Doctors can also use VR technologies to prepare for surgeries or operations. Imagine a group of
surgeons, and even nurses, collectively viewing and studying a 3D model or hologram of the area or
organ on which they will perform the surgery. They can simulate the series of steps that they will
perform during the operations. The whole medical team shall be on the same page when they perform
the actual surgery.

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Use of Virtual Reality in Auditing

Image : Virtual Reality in Medicine

source:
https://www.microsoft.com/en-
us/hololens/apps

Those creating prosthetics limbs can create virtual prototype of the ark or leg before creating the actual
prosthetics.

Some financial institutions including stock market operators are starting to explore the use of VR
technologies in financial transactions. Citi HoloLens Workstation allows Citi stock trader to view financial
information in hologram and at the same time allow him to conduct the traditional trading transactions.
https://arpost.co/2018/09/12/applications-of-augmented-and-virtual-reality-in-the-financial-industry/

How to use VR/AR in Auditing and Risk Management

Currently, VR Technologies are mostly being used for education and training for auditing and risk
management. But the increase in usage of VR/AR/MR by the different industries, it would be a certain
that VR/AR/MR will be used in actual auditing and risk assessment activities.

In the construction industry example above, auditors and risk management professionals can conduct
audit and review procedures without going to the actual site. They can review the design, check for
completeness, and assess the risks.

Object recognition technologies can assist the auditors in manual inspections such as spotting errors in
configurations, mis-alignments of parts, even wear and tear of parts and equipment. With MR, the
auditors can already see details and information about the parts, equipment such as part number,
purchase date, maintenance records among others. And as the auditors can automatically record its
observations, capture data easily.

VR/AR technologies can also be used for financial auditing and reviews. By displaying the financial
figures in three-dimensional graphs rather than two dimensional, it provides different perspective to the
viewer. Financial simulations can be performed real-time, visualizing how changing one variable can
change the forecast of the organization. Imagine using VR technologies to do monte carlo simulations,
or WHAT-IF analysis.

Prepared by : Solomon B. Anastacio, CISA, CISM

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Use of Virtual Reality in Auditing

Challenges on the use of AR/VR/MR in Auditing and Risk Assessment

There are number of challenges and obstacles to the fulland widespread use of AR/VR/MR in auditing
and risk assessment.

1. Content. Absence of content is still the main challenge and obstacle to the widespread usage of
VR in auditing and risk assessment. While it is already increasing, there are still relatively few
organizations using VR technologies in their businesses. Specifically

2. Cost. The technology itself is relatively cheap. Anybody can buy cheap VR systems and headsets.
However, in relation to the content problem, it will still require considerable resources to create
the content for use of the business.

3. User Experience. A number of people experiences dizziness, nausea, and even seizures when
using VR technologies. There is term Digital Motion Sickness where you can see the movement
but your body do not feel it. It will still take considerable time for the technology to really

4. Business Reluctance. Many businesses are still reluctant to adopt VR in their business as they
still view VR as just for gaming and entertainment.

5. Cybersecurity. As in any computer based systems, VR is susceptible to cybersecurity attacks.

Information on which the VR based its visualization can be manipulated and destroyed.

VR in the Future of Auditing and Risk Management

There is no denial that technology will play a big role in the auditing and risk management professions.
VR, in particular, could provide the big difference. Auditors and risk management professionals can now
perform tasks that previously not possible, maybe because of safety and health hazards.

In a 2016 research on Risk Analysis using Virtual Reality Technology, researchers found out that they
were able to identify a number of risks using complex VR models than document-based assessment
using the traditional CAD-models.

This proves that auditors and risk management professionals should not just be auditing and assessing
technology. They should also need to know how to properly utilize technology in doing auditing and risk
assessment activities.

Acknowledgement:

The author would like to thank the organizers: Association of Government Internal Auditors (AGIA) for
the opportunity to be with the delegates at event.

References:

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Use of Virtual Reality in Auditing

https://www.vrs.org.uk/virtual-reality/history.html

https://www.barclaysimpson.com/blogs/what-impact-will-virtual-reality-have-on-risk-management-
81361610542

https://www.pwc.co.uk/press-room/press-releases/pwc-unveils-virtual-reality-experience-to-help-
organisations-navigate-disruption.html

https://docs.microsoft.com/en-us/windows/mixed-reality/

https://www.youtube.com/watch?v=3mr_S5mOtsw

Prepared by : Solomon B. Anastacio, CISA, CISM