Unarguably, we live in a data-driven world. The best we can do is to try to adjust our lives and the processes therein to this predicament. Besides, recent developments, including economic downtime, have seen businesses look to internal audits to provide robust assurance and advisory service. To accomplish these objectives, internal audits have to take advantage of technology. That’s where internal audit data analytics comes in.
Internal auditors use data analysis to identify, gather, validate, analyze and interpretation of the various forms of data. While there have been concerns that data analytics tools could possibly obliterate internal audit teams, this couldn’t be further from the truth.
Before delving into the benefits of data analytics in internal audit, it is prudent to mention how internal audit teams deploy data analytics. For starters, an internal audit team can deploy data analytics tools during the planning phase. Specifically, data analytics tools come in handy during risk profiling and statistical sampling. These can also be employed during the fieldwork stage of the internal audit to audit continuous controls or possibly detect fraud indicators. Further, at the reporting stage, these data analysis tools can help with risk quantification or what’s often referred to as root-cause analysis.
Some of the typical areas where you’ll find internal audit teams relying on data analytics tools include when dealing with:
- General Ledgers- journal entries, adjustments and closing activities
- Master Files- customers, employees, and vendors.
- Accounts payable and receivable- improper disbursement, missed credits, timely collections, accurate product pricing, contract compliance and proper invoicing
This barely covers the many different applications of data analytics in internal audits.
Below is a breakdown of the different benefits of employing data analytics tools in the internal audit process.
Greater Assurance
A significant advantage of data analytics for internal audits is that these tools can be used to provide greater assurances. This includes what’s referred to as combined assurance. The data analytics tools employed in internal audits provide a more systematic and complete review of financial data. These include transaction logs. The latter is quite instrumental as you can then unearth any anomalies. This can then be shared among the different departments with the goal of unearthing whether the findings are in sync.
Suppose your organization decides on deploying audit analytics software. The impact will often be the ability to easily visualize and compare findings and results. Suppose you had to embark on sampling or other limited, manual processes. In this case, there’s the likelihood that you’ll miss out on something that would have otherwise indicated whether your findings were in alignment with the results you had obtained.
Improved Audit Quality
As highlighted, data analytics tools come in handy at every stage of the audit process. By deploying these tools, you stand a better chance at improving the overall quality of the audit process from the planning to testing and, finally, reporting. Besides, auditing tools make collaboration with different stakeholders a reality and quite attainable. This should come in handy not only during the auditing but also during the confirmation of the findings of the internal audit across different departments.
Overall, data analytics ensure a more systematic and efficient means to conduct the audit process. This systemic and, at times, automatic process should yield an internal audit process with greater quality. The latter will often be better than what you would have otherwise had with the manual process.
Enhanced Efficiency
Similar to most tech tools, data analytics tools should greatly help with saving time. Consider a situation in which your organization still relies on, for instance, Excel to review the mountains of data needed during the internal audit. This will often be incredibly time-consuming. Besides it leads to inefficiencies simply due to the sheer scope of work. In some instances, there’s a chance that the internal audit will not be attempted altogether.
Suppose your organization decides on deploying an audit analytics tool like TeamMate Analytics. Using said tool, you should be able to review more than 1 million rows of data. Besides, the tool comes with over 150 built-in tests that can be run instantly. Your auditing team can employ these to help visualize your data in a form that’s easier to understand.
Overall, an internal audit team can utilize data analytics tools to improve the overall efficiency of the audit process.
Clearer Reporting
Internal audits involve mountains of data. If internal audit teams were to present these, there’s the likelihood that departments would get lost in the interpretation of said data. As such, there’s a need to present said data in a more palatable format. That is where data analytics tools come in.
Data analytics tools help internal auditors to present the data in more digestible formats. The result is more impactful reports that feature powerful visuals, including charts and graphs. These data analytics tools make it easier to communicate the findings within your audit reports in a manner that is easily understandable. The consequence is more actionable insights that give your organization somewhat of an upper hand.
Better Risk Management
A benefit of data analytics that is quite attractive to internal audit teams is how employing data analytics tools can help improve risk management. Without said data analytics tools, internal audit teams would be forced to review data manually. This isn’t feasible. It means increased financial risks, cyber security risks, and so much more that would obviously go unnoticed.
When the internal audit team decides on employing data analytics tools, they should end up with limited data sampling methods, for instance. The result is the prevention of information overload. The benefit therein is that the audit team ends up reducing the management gap. This would have otherwise existed had there been a larger sample. What we see is that data analytics for internal audit helps spot and ultimately understand the risks. This is because tools can help with quickly reviewing large sums of data.
Overall, the internal audit process provides several benefits to the internal audit function. For starters, it brings about greater optimization of the audit methodologies as well as improving the audit results. Consider this. To have your internal audit process streamlined and to give your organization a competitive edge, you should lean towards data analytics for internal audits.