Benefits of solving Audit Problems with Analytics
As we all know, audit is the physical examination of various books of accounts by an auditor to make sure that all the transactions are recorded properly. It helps ascertain the accuracy of financial statements provided by the organization.
An auditor should always obtain a sufficient understanding of a client’s business in order to identify risks, such as suspicious transactions or potential fraud. Today, with growth in technological trends data has the highest capability of driving major factors like efficiency, profit and risk assessment. Every company data is comparatively large and has diverse sets of information. Companies are expecting more relevant insights from their auditors. It is now important to identify areas that determine which audit procedures can be supported by technology. Technology based Analytics in audit will help in performing substantive analysis on the data provided with much ease, especially when the data is comparatively larger. As we all understand, substantive analysis helps to check if the financial statements are free from errors and are valid.
How can you use analytics in audit:
Growth in technology and collection of information has improved the scope of adoption of new up to date audit approaches. Formal audit procedures can be performed by using computerized tool which accelerates faster supply and completion rate.
Benefits of analytics in audit:
1. Cover 100% Population which means complex data and larger data can be analyzed in much efficient manner using different trends and patterns. Testing complete sets of data, rather than just testing samples can be done.
2.There is rapid progress in work as it offers deeper insights into the performance and compliance of the company.
3.Standard quality across multiple teams / team-members can be maintained.
4.Providing audit evidence through comprehensive analysis of organizations’ general ledger systems.
5.Key metrics can be measured and compared with previous period quickly to get greater understanding.
6.Continuous or Concurrent audits can be monitored real time and there can be early fraud detection.
7.Aiding risk assessment through identification of anomalies and trends, perhaps even through comparison to industry data, pointing auditors toward items they need to investigate further.
How will it work :
As the audit plan is redefined in the current context of the organization, new and different tests and functions centered on the continuous flow of data are likely to be discovered. The auditor will be able to work with management to gather additional audit support, resolve glaring issues, and develop a more risk-based approach to the overall audit plan. The auditors would use a dashboard with indicators informing them of high-risk business processes and alerting them when individual transactions appear outside of acceptable materiality thresholds defined by the auditors.
For this, the auditors can have data scientists with the team to identify and areas which is high risk and with the help of complex algorithms like duplicate payments check can be easily conducted in any audit.
Major accounting and ledger scrutinization can be done at a much faster pace and with more accuracy. Taking an example of data matching where duplication or unrecorded data can be tracked, or trend of evaluation over time or extracting data from similar groups and criteria will help convincing stakeholders and giving recommendations effectively.
The role of the audit with technology will become more like a master control plan, which includes greater automated controls and greater timeliness. In an ever changing audit world, Auditors will be able to try and use new methods and techniques for evaluating enterprise data.
On the audit fieldwork side, less time will be spent extracting, formatting and modeling data which the automated process does for them. So, auditors can devote more time on analysis, looking for trends and applying professional skepticism.
As more work is performed automatically, auditors will have the opportunity to focus more on their judgment to the client’s environment which will produce higher-quality audits. Data analytics, combined with traditional auditing techniques, will give auditors a better understanding of their clients financial and risk environment.