Advances in data analytics techniques allow auditors to process the entire population of transaction data to identify outliers (i.e., unusual/suspicious transactions) that are more likely to be subject to misstatement. However, these techniques often generate a large number of outliers, making it impractical for auditors to investigate them in their entirety when performing substantive tests. This study proposes a Multidimensional Audit Data Selection (MADS) framework that provides a systematic approach for auditors to use data analytics in the audit data selection process. The framework also addresses a common obstacle of applying data analytics to the entire population of data—dealing with a potentially large number of outliers. By identifying problematic items from the entire population using data analytics and then applying prioritization methodologies to the resulting items, this framework allows auditors to focus on items with a higher risk of material misstatement and ultimately enhance the effectiveness of the audit. Show « Tax reform: Steps to implementation | Main | 5 cookie recipes for the best holiday ever » Your clients have a lot of information. And you, being the forward-thinking CPA that you are, want to use new technologies and techniques to get the most out of that data. So where do you begin? Audit data analytics (ADAs) is a great place to start. Using tools you already have – Excel, for example – you can analyze entire populations, find anomalies and identify patterns. To help you on your way, we’ve outlined five basic steps for planning, performing and evaluating the results of an ADA used to perform an audit procedure.
The first step is to develop a solid plan. Figure out what information you’ll be reviewing and what you want to get out of it. Are you performing a risk assessment procedure, substantive analytical procedure, or test of details? Or are you seeking to form an overall conclusion from the audit? Once you know your objective, then think about the population of data you have available. Give preliminary consideration to how available, relevant and reliable it is (you’ll consider this in more detail in step 3). Finally, identify which specific ADA procedures, techniques and tools you’ll use.
Once you obtain your data set, check that your data is in a usable format.
Make sure you fully consider the appropriateness of the data you plan to use. Is it internal or external? How was it obtained? What process was used to produce it? For example, although exceptions may exist, information is generally more reliable when it:
Did you achieve your objective? If not, you’ll need to plan and perform different procedures. If so, congratulations! You’ve successfully planned and implemented the use of ADAs in your audit. Throughout each of these steps, confirm you’re documenting your work in accordance with Generally Accepted Auditing Standards. The AICPA has free tools and resources to help you. Want even more? Check out the AICPA’s brand-new Guide to Audit Data Analytics, from which the above steps were extracted. The guide:
You can also learn more by watching a live webcast on ADAs on Dec. 18, or by visiting the ADA resources webpage. Lindsay Patterson, CAE – Senior Manager, Communications and Public Relations, Association of International Certified Professional Accountants Data analytics courtesy of Shutterstock Comments are moderated. Please review our Comment Policy before posting. What are all of the basic steps that an auditor might use for audit data analytics ADA )?The 5-step approach includes:. Step 1) Plan the Audit Data Analytics. ... . Step 2) Access and prepare the data for the audit data analytics (ADA) ... . Step 3) Consider the relevance and reliability of the data used. ... . Step 4) Perform the ADA. ... . Step 5) Evaluate the results and come to conclusion on ADA's overall effectiveness.. What are some examples of audit evidence that are commonly known?Examples of auditing evidence include bank accounts, management accounts, payrolls, bank statements, invoices, and receipts. Good auditing evidence should be sufficient, reliable, provided from an appropriate source, and relevant to the audit at hand.
What tool can be used by auditors to decide how much and what types of evidence to accumulate in each cycle?An audit risk model is a conceptual tool applied by auditors to evaluate and manage the various risks arising from performing an audit engagement. The tool helps the auditor decide on the types of evidence and how much is needed for each relevant assertion.
What are the 10 audit procedures?Audit Procedure Methods. Substantive audit procedures. ... . Analytical audit procedures. ... . Inquiry. ... . Confirmation. ... . Observation. ... . Inspection of documents. ... . Inspection of physical or tangible assets. ... . Recalculation.. |