While the core goals of audit quality and independence will remain, audit tools and execution will be transformed in the next few years by the application of Data & Analytics (D&A) capabilities. This is more than a trend. It’s the way audits will be conducted by virtually all major accounting firms. It’s critical that audit committees and executive management understand where the process is heading, what the broad benefits are, the essential role that technology will play, and how they can work with their auditors to prepare for the requirements of tomorrow’s financial reporting environment.
Going forward, auditors will be able to analyze much larger data sets – including up to 100% of transactions – rather than relying solely on random sampling. Being able to extract and analyze complete data sets helps auditors gain more visibility across complicated organizational structures, spot anomalies in performance and identify unusual transactions that may require further examination. The use of automation also increases the scope of financial information subject to testing and helps auditors concentrate their effort in the areas of higher risk and reporting complexity.
There is no turning back. A recently released Forbes Insights/KPMG report, “Audit 2020: A Focus on Change,” found 53 percent of executives surveyed see data and analytics as transforming how audits are conducted and enhancing audit quality and effectiveness.
At next week’s Current Financial Reporting Issues Conference sponsored by Financial Executives International, I will discuss the increasingly prevalent use of D&A in today’s financial audit. Session participants will gain a deeper understanding of how technological innovation is impacting both the quality and the nature of audit procedures.
Roger O’Donnell is a partner at KPMG LLP.