Data Analytics: The Future of Audit

Big data and analytics are enabling auditors to better identify financial reporting, fraud and operational business risks. But the technology to integrate big data and audits is still in its infancy, so how should the profession respond? Find out what experts and practitioners thought at the Data Analytics: The Future of Audit event, hosted by ICAEW and software firm Inflo on 17 November 2016.

More than 150 senior figures from across the profession attended the event and heard insights into the potential of data analytics to transform external audits and broader assurance services from:

  • Michael Izza, ICAEW Chief Executive;
  • Mark Edmondson, Inflo CEO;
  • Lisa Leighton, Audit Partner at BHP Chartered Accountants; and
  • Matt Stroh, Audit & Assurance Director at Grant Thornton UK LLP.

Exciting opportunity

Keynote speaker Michael Izza told the audience that technology presented exciting opportunities for the accountancy profession, but it also presented challenges for mid-tier and smaller firms.

The principal among these was that the cost of developing technology and training staff was considerable and beyond the resources of many of these organisations. Michael said there was also limited knowledge of data analytics and the event presented an opportunity to see how data analytics had some applicability to the work of auditors.

Data analytics in audit now

A panel discussion chaired by Henry Irving, Head of ICAEW Audit and Assurance Faculty, gave the audience first-hand accounts of how auditors are dealing with data analytics.

BHP’s Lisa Leighton explained that her firm was getting involved in data analytics because it was facing competition from bigger accountancy firms that were using the new technology to offer more cost effective auditing and assurance services.

The main challenges were to understand audit requirements from data analytics, as there was no one-size-fits-all solution, and how the technology fitted into existing audit methodologies.

Meanwhile, Grant Thornton’s Matt Stroh highlighted the extra value and insights that data analytics offered for his firm’s clients. But he also cautioned that achieving real-time auditing to deal with risk management and fraud detection, for example, was still some time away.

What practitioners think

The 150 attendees were asked to share what they understood by data analytics, as well as what they thought were the opportunities offered by the technology and the barriers to uptake.

The majority felt that cost was the key barrier that had stopped audit firms from using data analytics in the past, with available skills seen as the second most significant barrier.

Findings of poll of attendees at ICAEW's Data Analytics event on what has stopped firms from using the technology

Meanwhile ‘client services and insights’ was seen as the biggest opportunity offered to audit firms by data analytics, closely followed by ‘audit quality’.

Findings of poll of attendees at ICAEW's Data Analytics event on what the biggest opportunities offered by the technology

Future developments

Inflo CEO Mark Edmondson argued that the first step in the progression of data analytics should be to reach a common platform with a common way of viewing data. This would lead to consistency in benchmarking which would be followed by real-time reporting and real-time auditing.

However, Mark confirmed that he did not believe the technology heralded the replacement of auditors by robots. He said that there would always be a need for human auditors to apply their judgement skills.

Watch the presentations

Michael Izza’s keynotes speech, the panel discussion, Inflo’s practical demonstration and the audience Q&A session, were all recorded on the day and are available to be watched online.