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Cory Windham, Sarah Palombo – August 18, 2015
“Relevance” has become a buzzword among audit professionals as of late. It encapsulates the recognition many auditors, accountants and financial professionals are striving to achieve. Relevance has its rewards, such as always having a seat in the boardroom. Relevance is being seen as the “go-to” person within an organization. It is the opportunity to drive innovation from lessons learned rather than merely reacting to the past. While asking the right questions when suspicion looms, and providing assurance that controls work as expected are part of the job, there is much more to achieving relevance.
We gathered some top capabilities from expert sources and we invite you to add to our list:
Data analytics helps auditors and accountants gain deeper insights from the entire data population, rather than a sample. While sampling is a valid and useful technique adequate for some areas of the business, the ability to analyze anomalies detected against 100% of the data gives stakeholders a well-rounded view to make critical operational decisions with timely information. Spreadsheets perform well when presenting data that has been aggregated by the author to deliver basic insights. However, purpose-built analytics tools are designed to go beneath the surface of large volumes of data to discover correlations, patterns, trends and anomalies that would otherwise go undetected, sometimes for years.
No matter how large or powerful, all organizations are prone to risk, fraud and vulnerabilities. Behind every new insight an auditor may find, there is an undiscovered susceptibility that must be addressed. Data analytics provides auditors with the capability to test and compare records to find unexpected relationships between entries. This may be found by methods such as comparing inventory quantities to prior periods or by stratifying revenue into profiles using a Pareto analysis (80/20 rule). By identifying these areas faster, professionals can quickly identify inefficiencies, lost revenue or resources and potential fraud. Nothing earns you a seat in the boardroom faster than finding vulnerabilities that were previously undetected.
Auditors add value, and increase their relevancy, by providing timely information to the client to keep them informed of what is transpiring within the organization. As you dig through data, addressing the problems you’ve unearthed with management is just as important as finding them. If management perceives an area as risky they will design and implement appropriate controls, which audit will test and provide feedback on results. Data analytics, mixed with traditional auditing techniques, are highly useful when gathering intelligence about potential risks, testing key controls, reporting and monitoring.
Moving from ad hoc analysis towards continuous monitoring can be a game changer. Spreading out audit work throughout the year will position management to better control processes, resulting in quicker and refined future audits. Routine reviews will alert management to potential issues earlier, and modify audit plans in response. A proactive approach to addressing potential risks means problems are resolved swiftly and effectively. It also puts auditors in a position of providing real-time information, rather than reactive reporting.
New audit standards have shifted from “recommending” the use of professional data analytics technology to stating internal auditors ”must” consider the use of technology-based audit and other data analysis techniques.
New audit standards have shifted from “recommending” the use of professional data analytics technology to stating internal auditors ”must” consider the use of technology-based audit and other data analysis techniques. Supporting the clients’ business objectives requires more than samples and spreadsheets – it requires the use of professional technology. Achieving relevance takes resolve, the ability to deliver meaningful insights and the use of technology. What else does it take? We invite you to share your ideas with us!