You are not alone. 88% of audit teams are either in the process or plan to make analytics a part of every audit, according to the recent Touchstone Insights for Internal Audit, which has received over 1,200 responses from internal auditors around the globe.
The next question often is, “How do we do that?” But before asking that question, I would first ask, “What do you expect to get from these analytics?” When I hear from auditors and audit management about what they want to get from analytics, it generally falls into one of two categories – either management analytics or audit testing analytics.
Management analytics typically provide a high-level look at the data, sometimes with the ability to slice and dice it for different perspectives or drill down into the data. These are often put together in standardized dashboards that measure recent activity against KPI’s or prior month, quarter, or year performance. This type of analytics can be valuable to management.
However, audit testing analytics generally refer to analyzing the data and looking for some kind of anomaly. Sometimes the anomaly is known before running the analytics. For instance, if we want to look for any paid invoices that were prepared and authorized for payment by the same person. Other times, the anomaly is unknown, such as looking for unusually high dollar transactions or transactions that are unique because they are the only transaction that follows an unexpected pattern. The focus is on analytics to help substantiate the audit.
There is some overlap between management analytics and audit testing analytics, mostly because management analytic tools can do some audit testing and vice versa. You will find visualization to be the focus of management analytics tools. Tests like finding duplicates, outliers, Benford’s analysis and other tests auditors need to perform are the focus of audit testing analytics tools. These are different tools. You will want a tool that can support your analytics focus, or multiple tools if you plan to do both.
One last thing, most teams on this path realize that they need more than just their one analytics expert involved, which means you will want a tool that can do what you need it to do but is also intuitively easy to use by all auditors.