Data analytics and “big data” have become a game changer for internal auditing, as firms search for opportunities to provide more value to clients and respond to new regulations and increased pressure from stakeholders. Integrating data analytics into the internal audit approach isn’t easy, but the investment of time and money will help firms and businesses stay on the cutting edge and remain valuable in a dynamic business environment.
Below, we’ll discuss 5 key benefits of using data analytics, and then dig into how firms and companies can develop teams and processes to continually improve the effectiveness of their audit data analytics and data analytics capabilities.
5 Benefits of Using Data Analytics to Perform Internal Audits
1. An Integrated Approach to Internal Audit
Internal audits have become crucial as stakeholders become more interested in how the internal operations of a company are contributing to an innovative growth mindset. With that in mind, audit teams have become more advanced, employing subject matter specialists and data analysts to develop a sound and comprehensive audit process. This integration allows for the co-development of the internal audit approach, significantly improving audit effectiveness.
2. A More Comprehensive Business Understanding
A comprehensive approach to internal audit employing data analytics yields an audit with a more significant impact on the business. Data from inside and outside the organization can be used to develop a more comprehensive understanding of risk and a more granular understanding of internal audit findings. This deeper business understanding is more relevant to businesses and their stakeholders, providing more in-depth insights and a more comprehensive business understanding. Through improved risk assessment and audit analytics, firms can improve their businesses processes and internal controls.
3. Current and Future Cost Improvement
Although there may be some initial cost output to hire data analysts and implement data analytics within the internal audit process, developing automation within the internal audit will improve efficiency and drive costs down over time.
4. Advanced Identification of Risk
Data analytics help answer key questions and identify patterns earlier in the audit process, leading to increased efficiency in the audit as well as enhanced coverage of risk. Transaction risks can be assessed in real time and enhanced data access means teams can develop insights before fieldwork starts. Continuous auditing can also be implemented for enhanced risk management over time.
5. Encourage Innovation Within Internal Audit Teams and Firms
As we’ll talk about below, data analytics are dynamic and are constantly being updated and improved. Stagnant processes won’t cut it if your company or firm want to continuously grow and stay on the leading edge of internal audit technology. This concept needs to be presented to internal audit departments, and research and innovation within analytics should be encouraged within the firm. Not only does this help companies develop efficient teams, but it promotes job satisfaction for employees who are consistently encouraged to innovate and grow.
How to Develop a Data Analytics Driven Internal Audit Team
Not everyone in the Internal Audit arena has familiarity with current data analytics; after all, the idea of data analytics has been around for some time and has evolved considerably in the last 30 years. However, it’s important for public accounting firms and independent companies to ensure employees are able to utilize the most up-to-date data analytics in order to reap the internal audit benefits listed above. It’s also equally as important for employees to be dynamic and able to evolve as new techniques are developed and implemented. So how do you develop current employees and hire on new team members that are up for the job?
The market for those with data analytics skills is highly competitive, even outside the world of internal audit. Higher demand for these employees means paying a higher premium for their services, especially when other industries have the ability to pay data analysts more. But keep in mind a good data analyst (or a team of good data analysts) can improve efficiency within the organization, and drive costs down over time. It’s an initial tradeoff for not only lower costs in the future, but a reputation as leading-edge internal auditors.
The takeaway is, if you do plan on hiring new employees as opposed to training current employees, you may have a higher initial cost. However, you also will have the benefits of a team member who has specific skills related to data analytics and can implement them on day one of her position with the company.
If you’re considering developing data analytics skills with your current employees, it’s important to keep in mind it will take time. You also need to realize your employees have to be motivated to learn and grow; learning data analytics isn’t impossible, but it does take some personal drive in order to utilize efficiently. Explain to your internal auditors the benefits of data analytics first, how they’ll be able to answer small but important questions more efficiently.
Also realize data analytics doesn’t have to mean initially buying software or a training program. Data analytics can be done in Excel, and there are plenty of free training videos out there showing how to set up pivot tables and perform modeling. Have them learn the basic concepts of data analytics, then have them start to implement it into current audits. Over time, as they become more familiar with the point behind data analytics, you can start introducing more advanced analytics tools and techniques. The next step would be adding training and certifications into the mix. Again, it is going to take time. But with motivated employees, you can have your entire team up and running with data analytics as opposed to just having one hire who knows how to work with the data.
Through a combination of new hires and current employee training, you’ll be able to develop data analytics within your organization and cultivate a team that can implement these analytics within internal audits.
The Importance of Keeping Up With Data Analytics
While the idea of data analysis has been around since the 80s, the capabilities are still in the early stages of development, and audit teams are likely to see big changes and efficiency improvements as data analytics become more integrated and essential to internal audits. Implementing data analytics within the audit practice is only the first step; if a firm wants to stay on the leading edge and provide accurate and reliable service to clients, it’s imperative they continue to keep up with and integrate new technologies into their practice.
Firms also need to perform data analytics on their audit analytics and consider which type of analytics are being employed, and if and how they are improving processes within the audit. Data quality and data sets should constantly be monitored to ensure they’re providing the correct information for the questions being asked. Audit teams should also monitor where they are utilizing data analytics within the internal audit process and how expansive data analytics become in the audit process over time.
While implementing data analytics can seem like a big task, integrating them into your internal audit process will provide a myriad of benefits. Continuous improvement and hiring top talent will also ensure the sustainability of internal audit teams in the future, helping auditors provide value to clients and stakeholders, while staying up to date with regulations.
If you are interested in learning more about data analytics, Surgent offers courses on data analytics and the impact on financial statements, audit data analytics tools to add value, and the impact of big data as it relates to controllership skills.
Megan Bierwirth graduated from the University of Kentucky in 2013 with a Bachelor’s of Science in Accounting and passed the CPA exam within 6 months of graduation. She worked in both public accounting and industry while becoming a CPA and now runs a virtual bookkeeping company focused on preventive, integrative and complementary medicine professionals.
