Data Analytics: Providing Greater Internal Audit Depth During A Turbulent Economy

Data Analysis through Computer Assisted Audit Techniques (CAATs) is an efficient way to test transactions, providing 100% assurance on the effectiveness of Internal Controls. Using basic tools such as Microsoft Excel and Access, advanced tools such as ACL or IDEA, or the tools embedded in ERP applications has been a best practice for years but has often been viewed as a luxury, not a necessity. This year, during this economy, using CAATs has become absolutely critical.

Obviously budget pressures have gone through the roof, resulting in massive global layoffs. Reductions in work force, especially to the accounting department, create enormous pressure on the employees who remain. Requiring employees to take on more responsibility often increases the likelihood of errors and misstatements. Added pressures like salary freezes combined with less oversight can tempt an otherwise honest employee to cut corners or commit fraud. The risk of financial misstatement doesn’t get any higher.

A critical way to respond to these challenges is to increase (or initiate) the use of data analytics. This approach evaluates and monitors data from every transaction processed by a company to identify anomalies. Applying data analytics to review transactions in accounts payable, advertising, freight, health benefits, construction, and other areas can yield hundreds of thousands or more in savings and recoveries. When this process is done by management instead of internal audit, errors are identified sooner and with more precision.

CAATs have been around for more than 20 years and those experienced in using CAATs have had experience ranging from good to fabulous. Unfortunately CAATs have typically been used only by Internal Audit Departments and only on selected audit projects. The inconsistent usages of CAATs make it difficult to maintain the knowledge and experience to make CAATs a regular and sustainable part of the audit process.

With the status of the economy, CAATs have become an essential part of effective Corporate Governance. The first step is gaining the basic knowledge to make CAATs part of the oversight process. The second step is sharing the knowledge throughout the Internal Audit department and management ranks. The third step is imbedding the process into the fabric of the organization to make it sustainable and continuous. Getting more oversight with less effort is possible today by simply leveraging CAATs, a technology most companies already employ.

To learn more about how to make CAATs a routine part of the audit process, please contact Vonya Global for a free consultation. Leveraging readily available software tools in combination with proprietary methodologies, our team of data analysis experts focus data analytics at common problem areas to help our clients recover overpayments and develop a sustainable approach to continuous auditing.

ACL is a registered trademark of ACL Corporation and IDEA is a registered trademark of Caseware IDEA.

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This article was contributed by Joe Oringel and Kim Jones of Visual Risk IQ, a thought leader in Continuous Auditing and Monitoring. For more information on Visual Risk IQ, please visit their web site at www.visualriskiq.com.