Audit data analytics: Why auditors should care

Data analytics is likely to be a key driver of the future of the audit profession. For auditors, the big question is how prepared are we?

The use of audit data analytics promises to be a driver of audit quality in the future. But many auditors are still coming to grips with what these technological advances mean for their audits.

Chartered Professional Accountants of Canada (CPA Canada)’s new publication Keeping Up with the Pace of Change can help start a more informed conversation around the importance and use of data analytics in audits today. It is an excellent contribution to discussions taking place globally on this topic. For example, the International Auditing and Assurance Standards Board (IAASB) will soon be publishing its own paper on data analytics.

Why should auditors care about this now?

Technological advances are occurring at a rapid pace. Companies are changing their business models in innovative ways in response to these developments. Stakeholders expect auditors to adapt their audits to respond to these changes. Using data analytics offers opportunities to enhance the efficiency and effectiveness of many aspects of the audit in this environment. Some auditors have begun to explore how to integrate data analytics in their audits.

So what’s holding us back?

The CPA Canada publication sets out drivers and opportunities that indicate a need for auditors to embrace the use of robust audit data analytics. It also identifies a number of hurdles, primarily involving transition issues and whether and how audit data analytics fit within current auditing standards.

Canadian Auditing Standards do not prohibit the use of audit data analytics. However, because the standards do not specifically reference such techniques, unanswered questions may create barriers to auditors moving forward. One unanswered question is: how will audit regulators view these developments?

How is this going to evolve?

Global standard setters are actively considering how audit data analytics impacts their ongoing and future standards projects. In doing so, they are also evaluating how auditors in all sizes of firms are using audit data analytics today and factors to consider as standards evolve. CPA Canada is also currently exploring the use of data analytics in Canadian audits through an active research project of audit practitioners. CPA Canada expects to publish the results of its survey in 2016.

Final thoughts for Canadian auditors

It may seem like the audit data analytics journey is just beginning, but it is moving quickly.

In my view, data analytics is likely to be a key driver of the future of the audit profession, not only in terms of how audits are conducted but also in terms of the skillsets of our future auditors and the nature and extent of their work. Auditing might be much more interesting when techniques are used to assist in analyzing data and support professional judgments.

And don’t think this is all about big firms and big audits. Small and medium-sized entities using off-the-shelf financial reporting packages may be ripe for auditors who want to interrogate data using analytical techniques.

So, Canadian auditors need to open themselves up to the possibilities!

Keep the conversation going

Go to the CPA Canada audit and assurance section and learn more about this topic. Is your firm ready for audit data analytics? Let me know what you think it will take to move forward.

Post a comment below; or email me directly.

Conversations about Audit Quality is designed to create an exchange of ideas on global audit quality developments and issues and their impact in Canada.

About the Author

Eric Turner, CPA, CA

Director, Auditing and Assurance Standards, CPA Canada