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Aided by Data Analytics, Internal Auditors Dig Deep

Internal auditors who incorporate data analytics will reap the benefits of real-time risk management.

Internal auditors are becoming more aware of the power of data analytics and how it can help them find anomalies and highlight trends. Indeed, by incorporating data-analytics tools into their auditing practice, internal auditors are able to manage risk continuously and in real time, according to experts during a Pricewaterhouse Coopers webinar “The Internal Audit Analytics Conundrum: Finding Your Path With Data.”

“When you talk about analytics, it can mean different things to different people,” explained Duncan Barnard, managing director of risk assurance at PwC. But even if the definition of data analytics is fluid, companies know that it’s important. In fact, according to a PwC study, which surveyed 1,700 internal-audit leaders, CFOs and CEOs, 85 percent said data analytics is important to strengthening audit coverage, and yet only 31 percent of respondents are using data analytics regularly.

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Data analytics enables auditors to do more with less, explains Vikas Agarwal, PwC’s managing director of data analytics. Indeed, if companies make the investment in data-analytic tools up front, they’ll see a greater return on their effort, he adds.

For internal auditors, the challenge is turning that data from disparate sources (financial, compliance, unstructured data like email, etc.) into meaningful information, Barnard says. However, when data analytics is applied to auditing practices, it can increase risk coverage, make the audit cycle more efficient, offer real-time data, help auditors manage risk and build a more collaborative organization.

Payroll-services company Paychex launched a pilot program to explore what data analytics can do for its audit operations. “A couple of years ago, we were getting asked to do more with less and looking for more value-added audits,” Sean Miller, the firm’s director of internal audit, explained during the webinar. When he reviewed the company’s auditing process, it wasn’t effective or efficient. Data analytics tools seemed like the best solution.

But he ran into some cultural barriers when implementing the tools. The idea was new to the company and employees were hesitant to adopt it. Miller also had to figure out how to sell the investment to senior management as well as the audit team. The goal of the pilot program is to ease the company into data anlaytics, he says.

3 thoughts on “Aided by Data Analytics, Internal Auditors Dig Deep

  1. I’m partially retired now, but I feel that any auditor not familiar with CAAT’s and data analytics is “missing the boat.” Without doubt, it was the best move I made in my career selling the concept of acquiring software (DYL280) to perform computer assisted audit techniques. From the identification of inventory valuation errors, to excessive overtime payments, to embezzlement discovery, and many more benefits….none of them would have been as easily identified if I didn’t possess the skills to use audit software. We spent under $2,000 for the software in 1985 and it paid for itself on the very first audit (payroll). After that, the software benefited the company to the tune of many MILLIONS of dollars. Besides that, it was fun to be creative using the software…..”I wonder if this is happening”…..devise a routine to analyze it. Fun stuff for sure !!

  2. I think it would make sense to add CAAT tools within SOX testing. Please let me know if my idea make sense and if anyone has done this. Please provide any horror or success stories. Thank you very much.

    Cornelius “Neil” Graves

  3. Tom is spot on, and the data analytic tool choices are many and the data repositories diverse. Key implementation challenges include establishing a data analytics strategy. With that effort, determining whether data analytics should be an internal, external or a hybrid function will drive the initiative’s goals, objectives, organizational structure and tool investments.
    If you have established your data analytics strategy, please share that by posting a link to it on this forum.

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