DATA ANALYTICS FOR AUDIT

DATA ANALYTICS FOR AUDIT

In today’s digital age when companies rely on more and more on IT systems and networks to operate business, the amount of data and information that exists in these systems is enormous. A famous businessman recently said, “Data is the new Oil”.

The combination of processes, tools and techniques that are used to tap vast amounts of electronic data to obtain meaningful information is called data analytics. While it is true that companies can benefit immensely from the use of data analytics in terms of increased profitability, better customer service, gaining competitive advantage, more efficient operations, etc., even auditors can make use of similar tools and techniques in the audit process and obtain good results. The tools and techniques that auditors use in applying the principles of data analytics are known as Computer Assisted Auditing Techniques or CAATs in short.

Data analytics can be used in testing of electronic records and data residing in IT systems using spreadsheets and specialised audit tools viz., IDEA and ACL to perform the following:

•  Check completeness of data and population that is used in either test of controls or substantive audit tests.
•   Selection of audit samples – random sampling, systematic sampling. 
•  Re-computation of balances – reconstruction of trial balance from transaction data. 
•  Reperformance of mathematical calculations – depreciation, bank interest calculation. 
•  Analysis of journal entries as required by SA 240. 
•  Fraud investigation. 
•  Evaluating impact of control deficiencies. 

There are several steps that should be followed to achieve success with CAATs and any of the supporting tools.