Audit data analytics is going through an exciting time. There’s a lot of growth and a lot of new tools being offered. The movement recently towards updating the audit evidence standards is going to really open the floodgates for audit data analytics.
Audit analytics gives practitioners the ability to examine an entire dataset rather than just a sample, improving the quality of an audit.
Analytics is basically an analysis of data, where you can get a complete set and find anomalies, trends, or potential risk areas. The whole goal is to make the audit more efficient and more effective. In particular, auditors can improve audit quality with data analytics because you’re not constrained by sampling. You can look at that whole population and know from your analysis how many transactions or records meet a criterion without just trying to project the thing that you find in the evidence.
One of the best uses and benefits of audit analytics is helping you understand the clients’ system. Transactional data helps an auditor understand the flow of data and you can plan your audit more effectively and precisely. Allowing auditors to give really useful and insightful commentary and suggestions for the client. The real benefit of audit data analytics is the better insights that you can get and the more time to be able to offer those better suggestions. And that will increase the relevance of the auditor.
CPAs know that the best audits are the ones that are planned well. The analytic process often requires less time for the client as well as the auditor once it is established. And once established, you can focus on what you want to look at because you’ve used audit data analytics to risk assess and identify areas of focus.
As an auditor, whenever I think of analytics, I usually think of high-level ratio analysis of financial results for clients. One of the challenges is working with our clients to decide what is available and what are the controls around this data, the concept of data integrity, what’s the flow of data, who touches each piece of the data throughout the process.
Clients often have their data secured and encrypted, which can make it difficult to access. This is a little bit of a problem-solving exercise, but in more instances than not, the data is available. It’s just a matter of finding it and working together with our clients to do so.
Some of the benefits include:
- Strengthening risk assessments.
- More effectively tracking fraud and operational risk indicators.
- Enabling a real-time perspective on organizational risk.
- Performing risk-based audits.
In general, the auditing profession is governed by standards that were conceived some years ago and that did not contemplate the ability to leverage big data. But to achieve this transformation, the CPA profession will need to work closely with the businesses they are auditing and the audit regulators and standard-setters. For audit services contact DeHoek & Company, PLLC at 616-456-5530.