In today’s business environment, how a company works with “big data” has become analogous with how well that company does within its industry or market. Being able to effectively work with data to drive business decisions and develop business insights is the difference between a competitive company and a company behind the curve.
Data analytics have significantly changed the field of internal auditing, transforming manual processes to automated processes and providing deeper insights into the inner workings of a business. Internal auditors need to be aware of the changing landscape of the internal audit function and how they can use data analysis and data visualization to provide the best service for their clients.
7 Ways Data Analytics is Changing the Internal Audit Function
1. Developing a More Comprehensive View of a Business
The whole point of an internal audit is to evaluate the effectiveness of an entity’s internal controls, corporate governance, and accounting processes, all while searching for and improving inefficiencies. In general, the internal audit process is meant to provide both a detailed and high-level understanding of how the operations of a business are functioning.
Data analysis digs even deeper, providing the audit team and top management with a more in-depth understanding of how the company is functioning. Internal auditors can install data analytics processes at every stage of the internal audit, supporting the internal audit department while also providing a more detailed look at internal controls, financial statements, and accounting processes. As risk management becomes more integral in an increasingly dynamic and volatile business environment, it’s imperative companies can get a better understanding of their inefficiencies by using data analytics in the internal audit process.
2. Utilizing Employees with a Higher Skill Set
In order to stay relevant, both internal audit teams and accounting firms need to know how to work with data analytics within every stage of the audit, from planning, to implementing, to communicating findings. Data analytics are an important tool within internal audit, but if they aren’t utilized correctly, the conclusions can quickly become misconstrued, leading to inefficient decision making. Since the correct decisions can make or break the future of a company, knowing how to interpret data correctly and present it in a logical way are increasingly important skills.
Data analytics has proven the need for internal auditors with a higher skill set, who can efficiently review and interpret datasets in a meaningful way to the organization. These skills include understanding data collection, accurately interpreting patterns, and recognizing when other processes should be used in place of data analysis. Internal auditors need to enter the profession with a higher skill set than they did 20 years ago, or they need to be willing and able to learn how to work with data analytics. Those looking to jump into the internal audit field need to realize the importance of data analytics functions and need to develop the necessary skills to properly interpret and communicate data.
3. Identifying Risk Earlier in the Audit Process
Data analytics can be used to develop a better understanding of the audit process, as well as answer key questions and identify patterns earlier. This helps internal auditors to identify risks earlier in the audit process as well. Advanced identification of risks means an organization can implement changes or make decisions quicker than they otherwise would, allowing for a more timely analysis and improvement to internal operations.
4. Improving Communication
Audit analytics and subsequent data visualization help improve the way internal auditors communicate findings to upper management. It can sometimes be hard to communicate meaningful results within the financial services industry, but utilizing data visualization helps internal auditors explain findings in an understandable way.
5. A Potential Shortening in Audit Length
Using data and audit analytics to both plan and implement an audit can improve the audit quality while shortening the amount of time it takes to perform the audit. As we mentioned before, properly introduced and implemented data analytics throughout the audit process may answer key questions and identify organizational patterns earlier, allowing audits to be completed in a more timely manner. Data analytics also offer a platform for more automation within the audit, leaving more time for findings analysis.
On the flip side, audit analytics may identify more questions that need answering or patterns that weren’t initially expected. Working through these issues will provide a more comprehensive business understanding but may come at the cost of a longer audit process.
6. Changing Audit Costs
Shorter audits often mean more cost-efficient audits. Generally, this means internal auditors can use audit analytics to perform the same audit faster and in a more cost-effective way. However, it’s important for organizations to hire and train skilled employees to work with data analytics within the internal audit function, which may require an initial cost outlay as well as higher salaries over time. Developing an audit data analytics process may also require a higher initial cost; however, developing these processes on the front end will lead to more cost-efficient audits in the future.
7. Encouraging Innovation and Improvement
Companies have to consistently be evaluating how they can innovate and improve in order to maintain their status in the market. Internal audit findings have always been a key driver of efficient progress within internal controls and financial processes, but now audit analytics can be used to improve a variety of business operations, from marketing strategies to information technology implementation. Communicating findings to top management will encourage innovation and improvement within the company as a whole, and the desire to continuously develop more in-depth audit analytics will encourage innovation and improvement within the internal audit function of the company.
How You Can Become More Familiar with Data Analytics Today
It’s critical that internal auditors and audit teams develop the skills necessary to work with and understand audit analytics. And while the terms can be scary, there is one major step you can take today in order to become more fluent in data analytics: learn Excel.
Excel is a basic data analytics tool, but you’d be surprised how many organizations use the software to perform their audit analytics. Becoming more familiar with formulas, pivot tables, and even some entry-level programming will tremendously improve your data analytics skills and prep you for more advanced softwares within the data analytics space. If you work in internal audit or simply want to improve your data analysis skills, check out Surgent’s Excel course, which will provide an in-depth introduction into how the software works.