IAASB discusses challenges with the use and adoption of data analytics
Recently the International Federation of Accountants shared a video interview with the International Auditing and Assurance Standards Board (IAASB) Data Analytics Task Force chair, Robert Dohrer, and their working group members. In the video, they discussed the role of data analytics in audit along with the benefits and challenges associated with its use and adoption. Here is a summary of the interview.
Uses and benefits of data analytics in audit
It’s recognized that data analytics help improve audit quality by helping auditors gain a better understanding of business operations through financial records. Traditionally with sampling, auditors drew conclusions from a relatively small sample of the total population. Now with the help of technology, auditors can look at large populations of data and perform analytics on the whole of those streams, enhancing their ability to identify unusual items or misstatements. With improved understanding comes the enhanced ability for auditors to apply professional skepticism to confirm or disprove the process.
Where data analytics are used most often
According to feedback from respondents of the IAASB working group, data analytics is being used throughout the audit process and not just in one particular area. It is used both in the audit process and the risk assessment to help understand the business. It’s also being used to help assess controls, particularly automated controls, and in substantive procedures such as big data where internal data is linked with external data through analytics.
Challenges of using data analytics on a widespread basis
The most notable challenge is data capture. This is a huge barrier that hinders the adoption of data analytics. Most ERP systems and financial accounting systems perform report writing, but most do not have the ability to extract large volumes of data or the transactions necessary to perform the analysis. What has improved, though, is that the cost of servers and technology to drive and support analytics are more affordable. And the AICPA (American Institute of CPAs) is developing guidelines that encourage automatic mechanisms to extract the data for ERP developers to build into the system.
The skillsets of auditors also continue to be a challenge. Auditors are being asked to do things differently from what they’ve done in the past. Instead of picking samples they need to know how to interpret large amounts of data. And if there is an unusual item, there may be tens of thousands of unusual items. Do auditors have the skills to deal with that? It’s a great challenge to re-skill the entire audit population in something relatively new.
Interested in learning more about data analytics? Email us at email@example.com to subscribe to our monthly newsletter.
About Anu Sood:
Anu Sood is the Director of Product and Corporate Marketing at CaseWare Analytics and is responsible for the company’s global marketing strategy. Prior to CaseWare Analytics, Anu worked in various roles in the high-tech industry and her accomplishments range from writing software for telephone switches to launching a new global satellite communication service. Anu has extensive experience in strategic marketing, corporate communications, demand generation, content marketing, product management, product marketing and technology development.
Connect: Anu Sood