Internal audit departments are increasingly relying on data analytics technology and hiring more people who have sophisticated data analysis skills, according to a new survey.
The survey, by the consulting firm Protiviti, polled more than 900 internal audit professionals and found that 73 percent of those whose organizations perform analytics said demand for data analytics has increased, especially among organizations using so-called “best practices.”
“At a high level, what we’re seeing matches and mirrors what we’re hearing in the business community in this day and age, that people desire an increase in digitalization and robotics,” said Brian Christensen, executive vice president of global internal audit and financial advisory at Protiviti. “But clearly within the audit space, the use of data analytics is considered the best practice of today and the future, so audit professionals in our survey indicated they clearly acknowledged that. In many situations they’re still at the early stages of adopting and implementing these types of tools to better their audit process.”
Technology-oriented internal audit and accounting standards ranked as the top area for improvement cited by the survey respondents. Data quality is also an issue for many internal auditors using data analytics, with only 22 percent of the survey respondents rating data quality as excellent or good.
“I think the emergence of many new tools and techniques to assess data and the auditors’ ability to assimilate those in a meaningful manner is probably the current challenge people see,” said Christensen. “In the era of big data, there are clearly opportunities to capture and utilize that. We’re seeing that more and more in our daily life. The ability to assess, monitor and even create predictive behaviors from data sets around business processes assists auditors and stakeholders to increase the ability to adapt and adjust their businesses accordingly.”
Protiviti found that 34 percent of the auditors surveyed are planning to add more staff with analytics skills. “What we’re seeing is the emergence of the skillset of the auditor of the future may not mirror that of what we’ve seen in the past,” said Christensen. “Those that work with data are oftentimes referred to as data scientists. They may have a background in some business disciplines, but also an analytical viewpoint or a quantitative computer science type background that enables them to assist in reviewing the underlying business process.”
He pointed to credit card companies and retailers that monitor consumer transactions and behavior as models for how internal audits might eventually use analytics technology. “I think they are going to help guide the overall audit profession in adapting to more data analytics day to day,” said Christensen.
There are some challenges for leveraging data analytics in internal audits, however. Identifying where the data resides was cited as a challenge by 60 percent of the organizations polled, while system constraints were cited by 56 percent.
“What users of data indicate is it’s not one sole data set that provides the best information, but oftentimes it’s correlating disparate data information to assimilate predictive outcomes,” said Christensen. “I think that’s the holy grail of auditors who are able to combine that and turn that into a predictive mindset. They are going to be extremely valuable to supporting the business and stakeholders.”
Even with all the technology now available, internal auditors will still need to communicate their findings effectively to management and use their other skills.
“A question I’ve frequently received in conferences in talking with people day to day is ‘what is the future of auditing?’ And I think the future of auditing looks very bright, but it involves an evolving skillset that the auditor needs to have mastered a number of disciplines,” said Christensen. “It’s not just solely the accounting and finance type background, but the ability to communicate and understand complex data and apply that to the business itself. We’re very optimistic from what the survey says about the future of auditing, and we’ll look forward to see what happens.”