How data analytics is transforming internal audit
Data analytics is a game changer. But it doesn’t have to be a large, daunting undertaking. Internal audit teams have options to start small, build some early wins and demonstrate unique value to leadership. The key thing is to get started.
Why data analytics and why now? Because the old way of working is no longer efficient or effective. Data analytics has changed the scope of internal auditing, enabling organizations to reduce manual processes, get ahead of fraud and shine a necessary spotlight on where risks or opportunities are emerging.
For example, one financial institution we worked with was experiencing about $60,000/month in a certain kind of fraud attempt. Data analytics helped them spot correlations and take corrective action — dropping their exposure by 90%.
Another client applied analytics to accounts receivables, identifying which customers represented slow payment concerns. During the pandemic, with the ever-present threat of shutdowns looming, the organization determined whether they could accept certain orders with confidence, knowing they’d be able to cover their costs in a timely manner.
In another, we helped build a risk-based anti-fraud model that tested 100% of an organization’s manual journal entries. With automation, they could run it on a recurring basis in order to better prepare for and stay ahead of annual testing performed by external audit.
Here are four ways data audit transformation is already changing internal audits.
1. It’s weeding out inefficiencies
Internal audit processes can be highly repetitive, manual tasks that take time away from more valuable activities. The more these processes can be automated, the more time internal audit has for analysis, providing in-depth insight into how the organization is operating.
As an organization’s demand for — and expectations of — risk management increase, it’s critical that internal audit teams are able to stay efficient. As an ancillary benefit, eliminating repetitive tasks has the added value of engaging your critical talent with rewarding, retention-boosting work.
2. It’s eliminating random sampling
Random sampling is time consuming and outdated. Data transformation tools allow for automated analysis and audit of entire populations vs. random samples.
Organizations can reasonably and effectively look at 100% of population data. This helps reduce audit bias, eliminating the use of incomplete evidence to make decisions.
3. It’s preventing future problems
Manual detection inhibits timely corrective action. Data analytics can be used to identify correlations and indicators earlier, so organizations can implement mitigation efforts that get ahead of risk. Consolidated analytics can assist in identifying trends and then implementing controls directly into transactional software to automate future detection.
“Alerting” functionality democratizes the decision-making framework of an organization. When you implement controls into your data visualization platforms, the system will surface actionable insights vs. requiring an expert to do manual analysis (which is lagging and reactionary).
4. It’s telling new tales about your dark data
With data analytics, organizations can see what was previously “unseeable.” Traditional reporting methodologies generate aggregate info in canned reports with mainly surface detail. Meanwhile, your organization is missing out on a whole host of “dark data” — information you’re already collecting but not reporting on.
Data analytics allows internal audit to widen its scope — seeing and using more of the information already there (but hidden) in company systems. That information could be very insightful if people had the tools to look at it.
Start building capacity for data analytics
Despite these benefits, a lot of audit shops struggle with data analytics. Hurdles include lack of time, lack of funding, lack of skills or inadequate data access. If your organization is struggling with these pain points, you’re not alone.
And yet, internal audit teams cannot let these hurdles become outright barriers. Ignoring data analytics, or kicking the can down the road, does your organization a disservice. (Additionally, it can be a threat to your professional relevancy.) Now is the time to build your tools and your skillsets.
How Wipfli helps with audit transformation
No matter where you are on your audit transformation journey, we can help you modernize in a way that fits your organization’s goals. For some organizations, that means getting started in bite-sized chucks and identifying small wins. We can help you show leadership just how much value can be gained with a data-driven approach.
For organizations further along the data analytics maturity model, Wipfli can accelerate transformation, enabling deeper access to data and insight.
Learn more about our internal audit consulting services and contact us to talk about updating your internal audit capabilities.