Auditors must understand and respond to risk in the audit. Data and analytics (D&A) provides a new lens through which auditors can consider risk and provide deeper insight to clients for their own consideration of risk and, ultimately, strategy.
Firstly, the volume of data that auditors can analyse provides us with broader insight. Organisations can create a more complete risk assessment and, therefore, a more informed strategy if they know more about what is really going on. D&A helps shine a light on that.
Imagine a company’s auditable data as an ocean. Historically, auditors dipped a bucket in that ocean and looked at the contents. Based on this method, they might easily conclude there were no fish in the ocean. But put the entire ocean through a filter and you get a totally different picture. Catching any outliers allows auditors to focus their procedures accordingly.
D&A tells us a lot more than we knew before. A simple example is with financial journals posted during the year. D&A provides us with a much more complete picture of the whole population, telling us more than sampling would have done – relatively quickly we can get the overview of when all were posted, who posted them, how many were posted at one time and what their value is.
D&A can help us to audit transactional processing in real time, following up on any anomalies quickly. This helps companies identify processing errors much faster with up-to-date information on a range of measures. With the transactional audit areas covered, there is more time available for auditors to focus on the judgements and broader risks and for management to focus on risk and strategy.