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How data analytics is changing the face of internal audit teams

Date: 28 August 2015

Within the next five years, there will be trillions of gigabytes of data created and stored from businesses the world over. As a result, the business world has become increasingly concerned with how big data and data analytics can be used to better leverage internal information and further business success.

Alongside this trend, auditing teams are also growing. A number of high-profile news stories regarding either financial misconduct or security mishaps have led to business auditing becoming a high profile practice yet again.

And as both practices become more important to businesses, they have also grown to become heavily reliant on one another; the rise in data analytics is facilitating the need for larger audit teams, and these audit teams are similarly becoming reliant on data analytics to maximise their efficiency.

A recent Financial Times article revealed that some of the biggest auditing companies in the world are becoming more heavily reliant on data technology, with KPMG, Deloitte Touche Tohmatsu, PricewaterhouseCoopers and Ernst & Young all heavily investing in data analytics. In fact, Ernst & Young themselves have commented on the changing role of auditing and how big data and analytics will change the face of the practice as it currently stands.

There are some barriers to this change, however, including  the current complexity of data capture, as well as the vast number and variety of accounting and internal systems, which increase the complexity of data extraction for auditing purposes.

Nevertheless the Association of Chartered Certified Accountants (ACCA) agree that big data will cause big waves within the auditing process, stating: “The quantity of data produced by and available to companies, the replacement of paper trails with IT records, cloud storage, integrated reporting, and growing stakeholder expectations for immediate information — any one of these alone would affect the auditing process, but big data is bringing them all, and more, at the same time.”

As data encompasses the majority of auditing processes, auditors will have to become more innovative in their ability to leverage information – a plea publically echoed by the UK Accountancy watchdog.

The ultimate goal of the modern business should be to have an internal audit team that functions seamlessly alongside data teams; and this pairing is changing the face of auditing teams as we now know them. According to the Financial Times, better data analysis is helping innovative internal audit teams to:

  • Analyse entire data sets rather than relying on sampling, enabling more accurate detection of abnormalities. This is useful when reviewing expense claims for example.
  • To widen the scope of audit functions, encompassing more than company accounts and fraud detection, for example.
  • Make control testing more robust, transaction testing more substantial and balance testing more detailed.
  • Analyse unstructured data – for example, analysing qualitative data submitted on social media and via email to uncover suspicious behaviour.

In the past, we would have previously seen audit teams only hiring professionals with specific auditing qualifications. However to meet the priority for more intelligent business data, a new trend has emerged whereby companies are also competitively sourcing candidates with backgrounds in data analytics, IT and ERP systems.

Firms have identified that due to the specialist nature of these skillsets, it is far easier to train a data analyst to perform the audit function than the other way round. Yet, experienced auditors with strong profiles (notably those from the Big 4) still remain high demand in order to work alongside and train this specialist data talent, and to lead best practice teams. The face of auditing is therefore changing as data analysts and traditional auditors work side by side, evolving team dynamics and expanding the scope of the audit function as we once knew it.

At DSJ Global we specialise in the recruitment and placement of individuals within this space and keep our fingers on the pulse when it comes to emerging recruitment challenges and trends. For more information about the trends discussed in this article or for advice about job opportunities within this space, contact DSJ Global today.

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