Financial executives have witnessed a dramatic rise in expenses related to maintaining internal controls and audit-related costs, but members of FEI’s Committee on Finance & IT (CFIT) and Committee on GRC (CGRC) believe the use of analytics has the potential to help internal and external audit conduct more effective and efficient audits.
External and internal auditors are both using technology to increase audit quality, work smarter and potentially reduce costs. Advances in technology, specifically the use of data analytics, provide opportunities to improve how companies approach internal control monitoring and audit verification. The data analytics technology available today permits auditors to look at entire data sets, rather than manually reviewing statistical samples. This technology can detect and identify all exceptions, anomalies and outliers, rather than just those found within a sample.
An important question for regulators and the audit profession is who should be responsible for these exceptions, and how might they affect the auditor’s opinion. Auditing standards and processes, many written before today’s technologies were invented, will have to evolve and that process has already begun.
A soon-to-be-released report from FERF, Data Analytics and Financial Compliance: How Technology is Changing Audit and Business Systems, features interviews with forward-thinking internal and external auditors who focus not only on controls, but also on business process improvement. Here are some of the key findings:
Analytics Solutions:
- Data analytics solutions provide the means to replace traditional sampling techniques with reviews of entire data populations. All exceptions and outliers can then be evaluated.
- “Close the loop.” Find the problem, and make a sustainable change in the internal control environment to prevent that problem from happening again.
- The analytic output is not the end of the story. The individual consuming these insights needs to respond to them.
- The role of analytics is to pursue the type of issues for which you can't create preventative controls efficiently.
Internal Auditors’ Goals:
- Audit quality is the primary goal of internal auditors.
- A second goal is how to analyze large data samples.
- A third goal is efficiency.
- Internal audit needs people who:
- Know how to audit,
- Understand work processes, and
- Have expertise in technology or an interest in learning to use new software solutions.
External Auditors’ Goals:
- Audit quality is the primary goal.
- A secondary goal is to deliver more relevant business insights to clients.
- A third goal is efficiency.
- It's a competitive environment, and audit firms need to differentiate themselves. Technology and innovation are key differentiators, but audit firms need to have the right talent.
On
July 13, RR Donnelley, the project sponsor, will host a complementary webinar on “an overview of risk and compliance analytics solutions.” Panelists will include Michael Cangemi, the report’s co-author, Bob Cuthbertson, COO, CaseWare IDEA, Inc., Hank Roberts, Director – Internal Audit for Shaw Industries Group Inc. (a Berkshire Hathaway company), and Roshan Ramlukan, Principal, Global Assurance for Ernst & Young LLP.
Click here to register for this compelling webinar.