Data Analytics: how to improve the audit process

What is it?

For our purposes, data analytics is the automated analysis of data imported from a client’s financial systems.

Is it really new?

Technology is helping to reinvent the accounting industry with various surveys showing a cultural shift in the sector.

This shift is evidenced by the changes in the sector’s approach to data analytics, artificial intelligence and other technologies.

There is opportunity to expand the range of services accountants can offer their clients.

The impact of this cultural shift is relatively substantial with many areas of the profession affected, such as:

• The skills and training required
• Technology adoption and integration with existing processes and procedures
• Greater client expectations about the quality and type of services available

The analysis of data has always been a key element of the accounting and finance industry. Since the invention of programs such as Excel, we have had the capability to perform vast analysis that was extremely time consuming prior to the digital age.

These capabilities have been around for decades but often require huge data files which are both overwhelming and susceptible to override errors.

The introduction of data analytics tools into the accounting market has streamlined the process and made complex analysis much more efficient.

What are the benefits?

The adoption of this technology undoubtedly reduces the risk of data being missed which serves to ensure better analysis by auditors.

These tools help to identify risks, both at financial statement level and transaction level, as well as to help focus the audit approach on key areas in order to streamline the audit process.

Auditing has always relied upon sampling which inevitably carries a degree of risk as the entire population is not tested. Analytics allows the analysis of a complete data set and/or the identification of omissions or errors in the data set.

So, with automatic completeness checks and reconciliations, these tools go a long way in improving the audit output.

The tools provide data visualisation which presents the financial performance visually aid in understanding of the data.

This allows for greater feedback to clients on their business performance.

What’s the catch?

Ultimately, the output is only ever as good as the input.

The analytics systems are sophisticated enough to identify potential errors in the data sets, however, if there are substantial issues identified, it can be incredibly time consuming to investigate.

In addition, the systems can often be relatively costly. With the seemingly ever-increasing obligations on auditors (I won’t get into that here!), there is a squeeze on audit fees. To add in a separate data analytics tool does not always make sense in the context of the assignment.

What’s the conclusion?

The use of analytics is now widely available to auditors and although it can prove costly, in certain circumstances it is difficult to argue that the cost is not outweighed by the improvements to the standard of the service.

In my experience, the information I can provide and discuss with clients as a result of using data analytics is a great way to add value.

How can Haines Watts help?

We advise clients throughout Swindon and the South West of a broad range of technology that can be used to make the audit and accounting process easier.

If you would like to have a conversation to understand the complexities of the above, please get in touch with your usual Haines Watts contact.