Turning Analytics From Nice to Must Have

Jan 9, 2016


Turning Analytics From a “Nice to Have” to a “Must Have” in 2016

By Richard B. Lanza

I wanted to start this article with the following quote which I wrote in the past and believe to this day:

In my experience, as someone who teaches accountants to use audit software, the hardest step is the first one: making the decision to try an audit program. Once CPAs make that decision, learning how to use the application is relatively easy. From then on, the learning curve is swift as the auditor finds shortcuts for even more efficiency and discovers ways to make the audit process even more effective.

Ironically, it was from an article I wrote for the AICPA’s Journal of Accountancy in 1998 where I explained a variety of simple analytic techniques that anyone could apply yet for many of us, such usage still eludes our day-to-day auditing practices. For instance:

  1. 34% of auditors are required to use data analytics on audits with another 42% of them using such tools on an ad-hoc basis (2015 AuditNet® Data Analytics Use By Auditors)
  2. 47% of internal auditors either do not use or minimally use analytics with only 19% using them extensively (IIA Research Foundation: Staying a Step Ahead – Internal Audit’s Use of Technology 2015).
  3. 9% have continuous monitoring fully deployed, with 60% using data analytics informally or less (2012 AuditNet® Survey Report on Data Analysis Software)
  4. 90% of those who employ continuous monitoring report that they monitoring is focused on specific enterprise areas where there are known risks with less than 50% monitoring key risk indicators and less than 50% monitoring fraud risk (Protiviti’s Changing Trends in Internal Audit and Advanced Analytics).
  5. While 82% of CAEs say they leverage data analytics in some specific audits, just 48% use it for scoping decisions and only 43% leverage data to inform their risk assessment (2015 PwC State of the Internal Audit Profession).

So when we look to the reasons why usage is not optimal, we are met with a variety of inter-related truths:

  1. 48% of auditors are not trained in analytics with nearly 25% more not having the time to learn the software (2015 AuditNet® Data Analytics Use By Auditors).
  2. Globally, only 1 out of 10 internal auditors had education in information systems or computer science (IIA Research Foundation: Staying a Step Ahead – Internal Audit’s Use of Technology 2015).
  3. Roughly 80% of audit teams do not link the use of analytics to their job-related objectives (2015 AuditNet® Data Analytics Use By Auditors)
  4. Current external audit standards are rooted in traditional audit processes where sample vs. the entire body of data is still the focus (http://tinyurl.com/hpprm3e).

In our upcoming complimentary Minutes to Analytics 2 CPE webinar Feb 10, 2016 – Turning Analytics From “Nice to Have” to “Must Have” , Jim Kaplan of AuditNet® and I will explore this topic and provide a series of next steps from best practice organizations who have succeeded with analytics. In summary, we will at a minimum go over the following:

  • Identifying any fear of automation early in the process and ways to overcome such obstacles with team members.
  • Using new approaches on training that focus more on just-in-time approaches with specific and practical exercises.
  • Building a team of analytically-enabled auditors instead of relying on select champions with time constraints.
  • Identifying the “low hanging fruit” areas to begin your analytic efforts as you move to a more continuous approach.
  • Where Big Data can go from being just a buzzword to a key component of your 2016 testing plan.
  • The use of script libraries to automate your testing while using “the power of prototypes”.
  • How automation of the data access steps, namely the ETL (Extraction, Transformation and Loading Process), can help ensure a continuous audit process.
  • How year one investments in analytics can lead to a perpetual cash machine for the organization in all subsequent years.

We look forward to seeing you at our first 2016 training event as we embark on our fifth year of training auditors with analytics. Please click on this link to learn more and register for our complimentary 2 CPE training:Feb 10, 2016 – Turning Analytics From “Nice to Have” to “Must Have”