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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.

In addition, internal auditors must work with the information-technology department. At Paychex, IT didn’t want to give auditors access to the data source, so Miller had to work with them and garner their support to pull the right data for audits.

Denise Cicchella, executive director and founder of Auspicium, says her construction-auditing consulting company uses data analytics on a regular basis for recalculations and trend analysis.

“As great as an auditor may be, they eventually get tired. The computer doesn’t get tired,” she says. For example, data analytics helps spot anomalies auditors may miss. If a project is 20 percent completed, but the company has been billed at 60 percent “that would raise a red flag,” she says, adding that data-analytics tools help find patterns an auditor may not be able to pick up on immediately, including such misdeeds as collusion and bid rigging.

Not only does data analytics help with more accurate recollection, it also helps find missing data, which is often an indication of an error, or even worse, fraud, she says. In fact, if used correctly, analytics can help find a needle in the haystack, validate efficient controls and effectively help navigate around complex issues. Data analytics can make information “meaningful, quick to digest and relevant,” Barnard says.

Barnard says auditors can embed data-analytics tools throughout the audit process. During risk assessment, data analytics allows for continuous monitoring so auditors can figure out key risk indicators, upload the data and use it on an ongoing basis. “People weren’t thinking about ongoing risk-assessment process, but it’s getting a lot of attention today,” he adds.

Ultimately, data analytics can permeate a company, helping it grow and mature. Miller says the practice is benefiting Paychex by putting the tools “in the hands of people that knew the business” and allowing them to do “more sophisticated work.” The audit team can be pioneers for data analytics. “Audit can serve that role [as trailblazer],” says Barnard. 

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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