As a controller, you’ve likely seen the technology stack at your organization get bigger, broader, and more diverse. This decentralization of technology and democratization of purchasing has probably made your job easier in some respects and harder in others. However, when well-built and well-integrated, it can help companies do more.
But as the technological footprint of a business grows, keeping it organized and verifiable is a challenge. In turn, many audits have begun to rely on big data for audit judgment and behavioral research. In a recent report titled Big Data and Analytics in the Modern Audit Engagement: Research Needs, authors explored the adoption of big data and analytics for both sides of the audit and discussed how it may impact the larger audit process.
What is Big Data?
As discussed in CPA Journal, “the discussion of “big data” has generated tremendous insight into business management and led companies to rethink their strategies, implementing intuitive and meaningful methods of utilizing the wealth of information available in the 21st century.”
So what is it? Defining it starts with the “four V’s,” massive volume, high velocity, large variety, and uncertain veracity. From here, it’s all about being able to combine many different types, formats, and sources of data into a coherent output.
So What Does Big Data Mean as it Pertains to Audits?
Many expect Big Data usage to grow in the audit field. Anticipated to make important contributions in the audit field, external auditors expect Big Data to enhance the quality of audit evidence and facilitate fraud detection. Here are just a few ways this may work:
- Moving from sampling to population-based audits.
- Giving auditors a bigger-picture view of the operations and the power to analyze it.
- Connecting information that would otherwise exist in silos to provide more evidence and veracity.
- Improving prediction accuracy by making it easier to denote relationships between multiple financial items.
- Enhancing the effectiveness of fraud detection by generating connections between financial and nonfinancial information.
Big Data and the Shift from Traditional to Future Audits
The tools used by auditors are evolving, but often these are being pushed by the companies who request an audit. According to a report in Accounting Horizons, the main driver of big data application by auditors is client-side demands.
However, according to an AICPA whitepaper on the evolution of audits and the audit of the future, in order to get from traditional to modern audit, clients need to connect, convert, and provide readily accessible data for auditors. Often, this will require a new look at technology and a new understanding of how auditors will use the data you provide.
The Audit of the Future Requires New Skills and Technologies
As the business landscape becomes more connected, the audit landscape will change with it. Whether that’s a change from paper- and sample-based analyses or a change in the standards that govern audits, the past decade mas made for a change in the way audits work—but likely pales in comparison to the changes we can expect in the coming decade.
Whether it’s new skills, technologies, or practices, the Controllers Council is here to help you stay on top of the changes that could affect your job. Follow us for all the latest.
Learn more in our Controllers’ Guide to Artificial Intelligence (AI).