Importance of Data Analytics in Audit and Assurance
As auditors in Sri Lanka we, increasingly need to know more about their clients’ businesses to provide effective services. Data analysis plays an important role within the audit profession in Sri Lanka. Up until now data analytics in external audits and internal audits have only been limited to large public companies. However, now data analytics can be used to provide value added services to our small businessman in Sri Lanka.
What are Data Analytics in auditing?
Data analytics is a discipline focused on extracting required information from data. The ACCA (UK) defines data analytics for audit as the science and art of discovering and analysing patterns, deviations and inconsistencies, and extracting other useful information in the data underlying or related to the subject matter of an audit through analysis, modelling and visualisation for the purpose of planning and performing the audit.
Benefits of data analytics
For audit companies like us in Sri Lanka, the main driver of using data analytics is to improve audit quality. Quality of audits are increased due to below benefits;
- Data analytics allows auditors to further understand the client’s data to identify patterns and trends.
- Time can be saved significantly especially in conducting sample tests.
- Auditors can identify and focus more on client specific risks.
- It is easier to conduct sensitivity analysis.
- Data analytics allows auditors to be more consistent especially in conducting group audits.
- Auditors can share analysed data with the clients. We believe that this is significantly important for small business owners in Sri Lanka as data analytics are rarely used by average businessman in Sri Lanka for decision making purpose.
Problems in data analytics
There are significant challenges that audit company like us have to face in performing data analytics. The main problem we face is the lack of resources to consistently maintain quality standards. Refer below for some of the problems we face;
- High costs in purchasing and maintaining sophisticated data analytics tools. Sri Lankan businessman tend to be more price concisions. Therefore as audit companies in Sri Lanka we have to keep our operating costs low to remain competitive in price sensitive market.
- Maintaining confidentiality and privacy of the information. Some times clients are reluctant to give auditors access to information due to various reasons.
- Audit staff may not be competent to understand the exact nature of the data and output to draw appropriate conclusions.
- Lack of information, systems or incompatibility with client’s systems can be an issue.
- Completeness and integrity of the extracted client data may not be guaranteed.
- Data analytics can create a gap between client’s expectations and auditor’s ability to analyse the data.
In conclusion All the big four firms rely on a developed platform and software to carry out several key functions that are required for audit purposes. It is time local audit firm like us to provide the same quality of services to SME sector in Sri Lanka.
Article By – Sithira Ranwatta