Auditors need to add more efficiency to their processes as information is created at a faster pace than ever before. In this increasingly data-driven world, the key to doing so lies in the adoption of new methodologies and audit technology tools.
“The additional access and insights technology can give you into the data helps you see a bigger picture of the business you’re auditing,” said Erin Leckie, Head of North America Solutions for Caseware. “By getting deeper insights, you can paint a whole picture — not just the numbers.”
Leckie made her comments during a recent webinar examining the current audit landscape and how audit engagements need to evolve to keep pace with increasing floods of data.
Clients Want More Audit Value
Generating a more complete picture of the business is crucial, Leckie noted, because as businesses adopt new technologies, such as big data, artificial intelligence (AI) and machine learning, their expectations of their auditors are changing. They’re demanding more insights and value than they have in the past.
Today, there are three key features audit tools must have to deliver a more complete business picture:
- Data-driven engagement – Historically, when auditors have talked about data, they’ve been referring to the trial balance or general ledger detail, Leckie said. But a true data-driven engagement should include all data types, including auditor and third-party data.
- AI-infused engagement – Audit activities that are repetitive and tedious should be automated to save time.
- Collaboration and cloud computing – Auditors should have integrated tools that allow for improved collaboration with clients. This makes it simpler to collect information securely and reduces the amount of time spent sending files and requests back and forth.
Different Audit Data Types
When it comes to data, an audit solution should be able to incorporate information from three main categories: transaction data, engagement data and domain data.
- Transaction data includes client-created information, as well as third-party data, such as statements or invoices. “By bringing this data directly into the engagement, we’re able to do things like transaction matching, or process matching, which then gives us a better idea of the remaining risk within the audit engagement,” Leckie explained.
- Engagement data is the auditor-created data. This can be valuable when auditors are looking across the firm, helping to identify risky clients or areas.
- Domain data could be governmental data, news or social media. For example, in Canada, it could be Industry Canada data or in the U.S., it could be Securities and Exchange Commission filing data.
Traditionally, in most engagements, data isn’t brought in until after the initial client acceptance and after the auditor has established an understanding of the business, Leckie noted.
But this is changing. Data is beginning to be used at all stages of the engagement.
“So starting with the pre-engagement work and the initial acceptance and continuance, you’re presented right away with the understanding of the business, the data and the influencers,” she said. “This is driving the gathering of evidence and the risk assessment, which is then building up the documentation and the deliverables back to the client.”
The Data-Driven Audit Engagement in Action
Leckie illustrated how auditors can begin moving toward data-driven engagements that create more value for businesses by showcasing features from Caseware Cloud Audit, a platform designed to let auditors focus on the right areas for each audit engagement.
She began by highlighting the solution’s Optimizer feature that includes questions to help auditors tailor each client engagement. Optimizer ensures clients and auditors don’t need to deal with unnecessary documents, procedures or risk areas that aren’t applicable, saving both parties valuable time.
Another time-saving feature in Cloud Audit is its document collaboration. Query documents are embedded in every engagement. For example, auditors can build an engagement letter template that can be easily saved and then customized for individual clients. The product includes e-signature capability, a paperless, secure and efficient way to sign documents. Auditors and clients can also communicate in real-time without leaving the secure Caseware Cloud environment.
Auditors are able to check the status of all query documents in an engagement through a dashboard that displays the progress that’s been made on each document, as well as due dates. This gives them more visibility into the query process and saves them from looking through email chains to find the status of each document.
Centralizing Risk Management
As auditors are moving through an engagement with Caseware Cloud Audit, they’re able to add potential risks to the engagement file. They can save the risks and come back to them later during the engagement to add audit responses when they’re ready. The benefit of having a centralized risk management system is it’s simpler for auditors to track that they’re doing the appropriate amount of work for each risk identified, Leckie explained.
Caseware Cloud Audit includes analytics capabilities through its AnalyticsAI feature. This tool can look at 100 percent of a client’s data. For example, it can run through all the journal entry transactions, assign a risk score to each transaction, and then display them in the order of the amount of risk they represent. Auditors can choose which risk test they want to run, such as unusual times, unusual users or unusual amounts.
Other features of Caseware Cloud Audit highlighted during the webinar include materiality and sampling. Materiality can be referenced at any time once it is documented. Any assessment that’s higher than materiality will be flagged. And sampling can be performed from directly within the engagement file, saving auditors from having to make Excel configurations.
An Evolving Practice
Implementing a true data-driven engagement model won’t happen overnight, Leckie explained. It will take place in stages over time:
- The first stage in the evolution will be the integration of tools and guidance embedded directly into the engagement.
- The second step will involve suggestions and predictive content generated by the engagement data.
- And the final stage will be arriving at a true data-driven engagement.
“This isn’t how we’re used to doing audits,” Leckie said. “It’s not just a matter of having the new tools and technology. It’s also about training staff on the usage and interpretation of the results. And there’s also the methodology.”
But, as Leckie illustrated, the building blocks for creating data-driven engagements are already in place, and auditors can begin adopting them to save themselves time and add value for their clients.
Watch the webinar for more insights on today’s modern, data-driven audit that is creating new efficiencies.