Analytics in auditing could be a game changer, says study

BANGALORE, INDIA: Organizations worldwide are undertaking business and digital transformation initiatives, enabling changes that will have far-reaching effects on every enterprise function.

Cybersecurity, enterprise risk management, fraud, vendor risk and corporate culture are among numerous areas that dominate 2018 audit plans for organizations worldwide, according to the study.

As boards and executive management demand deeper insights into the strategic risks that organizations face, ability to leverage data analytics and automation will be front burner priorities for Chief Audit Executives and their teams.

Data analytics will be a game changer for the internal audit profession and internal audit functions should determine how to transition to analytics to improve their coverage of the aforesaid areas, suggest a recent study conducted by Protiviti, a group of the independent consulting firms helping companies solve problems in finance, technology, operations, governance, risk and internal audit.

"As data and digital technologies are spawning emerging risks, instead of looking at disruption as their adversary, audit and assurance functions should embrace disruptions into their work. In a digital world, each activity leaves a trace. The secret to counter the impact of disruptions in business, is to use same data and digital technologies to make the audit function smarter, agile and future-proof," said Amit Ray, Managing Director, Data Analytics - Protiviti Member Firm for India & Middle East.

"As businesses become more data-driven and emerging technologies disrupt conventional assurance paradigms, it is imperative that assurance functions keep up with the changes in order to stay relevant. Most Internal Audit departments are still struggling to develop a formal methodology for adoption and integration of analytics into their work. It is critical for Audit functions to have a sustainable and resilient analytics program for the purpose of providing comprehensive, efficient and timely assurance," said Sanjeev Agarwal, CEO - Protiviti Member Firm for India & Middle East.

The study took a look at how internal audit groups are leveraging analytics in the audit process, where improvements are needed:

The use of analytics in auditing remains in the early stages – The maturity of using analytics in the audit process remains relatively low; many audit functions are likely using analytics tools as point solutions as opposed to part of broader initiatives to leverage analytics throughout the audit process.

There is a correlation between audit committee engagement in analytics and information the committee receives around internal audit’s use of analytics – The study suggests that if a high level of information is shared with the audit committee regarding the use of analytics in auditing, the committee’s overall engagement in the process, which can include its willingness to authorise further investments in analytics, is higher.

The study also found that the European(76%) and Asia-Pacific organizations(76%) are apparently more advanced in numerous audit analytics capabilities relative to organizations in North America(63%), though again, the use of analytics likely is higher for point solutions versus broader programs and initiatives.