Data analytics can provide valuable insights for companies in many industries when used as part of the internal audit process. While utilizing data analytics to optimize audit operations isn’t a new concept, the ever-evolving landscape of technology and rapidly changing markets has caused the benefits of utilization to grow exponentially. Among many other improvements, data analytics can offer:
- Process automation
- Robust client management and report systems
- Ability to access and disburse data
Data analytics can be effectively integrated into all phases of the audit process, from providing statistical information in determining high-risk areas of focus, to performing entire population testing instead of sampling.
Across industries, there are many areas in internal audit where data analytics can be easily implemented and exceptionally useful.
For investment advisors, areas include:
- Transaction monitoring for compliance with set approval limits, including trade processing, disbursement requests, or investment portfolio thresholds
- Duplicate trades, disbursements, or check numbers
- Comparison of internal investment holding records to custodians
For financial institutions, areas include:
- Transaction monitoring for compliance with set approval limits, including lending authority, payment processing, or investment purchases
- Duplicate purchase orders, invoice numbers, or check numbers
- Review of file maintenance for appropriate segregation of duties
For manufacturing, distribution, and retail companies, areas include:
- Transaction monitoring for compliance with set approval limits, including supply requisitions, payment processing, or overtime monitoring
- Agreement of purchase order amounts to invoices for inventory received
- Process monitoring for compliance with set time frames
- Agreement of invoices to cash receipts
Creating or Enhancing Your Data Analytics Audit Program
Here are some steps you can take to establish or enhance your data analysis plan:
- Identify personnel with data analytics skills. If necessary skill sets need enhancement, conduct trainings or find outside resources to assist in the program development. The number of individuals required to be trained will vary based on how you plan to use data analytics.
- Review your existing audit program and identify current manual tests that can be automated. Update the audit programs to provide clear guidance on new techniques.
- Ensure internal audit personnel have necessary access to data and an understanding of the data format required to utilize the data analysis tool.
- Establish validation methods for ensuring completeness of information provided.
- Review results of data analytic procedures and update your approach to reflect resolution of false positives.
- Convert established data analytic steps into automated tests through the use of scripts or other methods.
- Review automated tests and determine if similar techniques can be used in other areas.
- Create scripts to automatically perform the audit procedures for routine tests.
- Develop a schedule for automated tests and communicate results to management regularly.
- Periodically review automated scripts for required updates and effectiveness.
Accurate analysis of data can be burdensome, often taking up valuable time and resources to sift through information to adequately audit internal processes. However, a streamlined approach can be created using the latest in data analytics—allowing investment advisors, financial institutions, and manufacturing, distribution, and retail companies to capitalize on fast access to critical data and organized systems of information.