As we continue to operate in one of the toughest and most uneven economic climates in modern times, the relevance of the role of auditors in the financial markets is more important than ever before. Audit firms must continue their robust audits to serve the public interest by increasing quality on a continuous basis and by delivering more insights and value to the users of the financial statements. Professional skepticism, and a continued focus on the quality of audit evidence, are required throughout an audit. Meanwhile, companies are expecting an enhanced dialogue with their auditors and more relevant insights.
While the profession has long recognized the impact of data analysis on enhancing the quality and relevance of the audit, mainstream use of this technique has been hampered due to a lack of efficient technology solutions, problems with data capture and concerns about privacy. However, recent technology advancements in big data and analytics are providing an opportunity to rethink the way in which an audit is executed.
The transformed audit will expand beyond sample-based testing to include analysis of entire populations of audit-relevant data (transaction activity and master data from key business processes), using intelligent analytics to deliver a higher quality of audit evidence and more relevant business insights. Big data and analytics are enabling auditors to better identify financial reporting, fraud and operational business risks and tailor their approach to deliver a more relevant audit.
While we are making significant progress and are beginning to see the benefits of big data and analytics in the audit, we recognize that this is a journey. A good way to describe where we are as a profession is to draw parallels with the TV and film subscription service Netflix. When the company started in 1997, it adopted a DVD-by-mail model, sending movies to its customers, who returned them after an evening or a week of entertainment. Netflix always knew that the future was in online streaming of movies, but the technology was not ready at that time, nor was high-speed consumer broadband as prevalent as it has since become.
Today, we are engaged in the audit equivalent of DVD-by-mail, moving data from our clients to EY for use by auditors. What we really want is to have intelligent audit appliances that reside within companies’ data centers and stream the results of our proprietary analytics to audit teams. But the technology to accomplish this vision is still in its infancy and, in the interim, we are delivering audit analytics by processing large client data sets within our environment, integrating analytics into our audit approach and getting companies comfortable with the future of audit.
The transition to this future won’t happen overnight. It’s a massive leap to go from traditional audit approaches to one that fully integrates big data and analytics in a seamless manner.