Advances in data analytics are allowing today’s auditors to gain greater insights into their clients’ organisational structure and provide them with higher levels of assurance at similar or even lower costs than ever before.
The days of audits based on small samples are fading in favour of greater analysis based on complete data sets. This more comprehensive analysis provides better audit evidence and points auditors to areas that need further investigation by identifying trends and anomalies.
Data analytics can greatly improve the quality of audits and present some exciting opportunities for the future. But it is important to remember that advancements in technology and analytics are not solely responsible for the better audits. Auditors’ own decisions are just as important as ever. The value is not found in the sheer quantity of data, but rather what can be done with its analysis.
Opportunities and challenges
Many things that formerly needed to be performed on-site by auditors, like ledger entry testing and bank confirmations, no longer require live auditors. These procedures can now be performed remotely, meaning they can easily be outsourced to third parties if needed, allowing auditors to focus their attention on more crucial areas like fraud detection.
Although technology allows auditors to maintain assurance levels at reduced costs, a more laudable goal would be to maintain spending levels in order to achieve greater assurance levels that open the door to decreased risk and increased value for clients.
In order to take full advantage of the latest advancements in data analytics, current procedures and attitudes will need to be recalibrated. The continuous auditing processes that are enabled by technology and data will only reach their full potential if auditors push themselves to strive for higher assurance levels, rather than being satisfied with minimum requirements.
This goal should be easier to reach now that financial statements can be immediately recorded online instead of being released in periodic statements. Auditors can now spread their work evenly throughout the year, whereas in the past, they had long periods of downtime punctuated with bursts of hectic work when statements became available. The higher quality of data within reach, together with a more evenly distributed workload, allows auditors to better identify potential problems and adapt their strategies accordingly.
There are many ways for auditing firms to evolve. Some enlist third parties to assist with the digital transformation process. Others decide to purchase new technologies and incorporate them without outside assistance. Still others invest in developing their own in-house tools and technologies. What’s most common is a mix of all of these strategies.
Although auditing technology is designed to be user-friendly, developing the technologies themselves requires a high level of technical sophistication. For that reason, firms need to either hire their own experts or be willing to make new alliances.
Some auditors may be concerned that increasing the use of new technology will lead to fewer auditors being needed. But advances in data analytics will actually increase the demand for competent auditors.
Of course, firms will have to set their auditors up for success by training them to properly use the new technological tools that are available. But as long as veteran auditors are adaptable and open to advancements in their field, their experience will only become more valuable. Data analytics provide a powerful new tool for auditors and will revolutionise the industry, but the traditional auditing skills of diligence and good judgment will always be indispensable.