For example, if the audit calls for analyzing 100% of the revenue generated by a high-volume, low-dollar retail organization, the results may provide insights related to pricing in various markets that could provide value to management. With these data-driven insights, auditors and organizations may want to have more focused, upfront planning sessions with management and spend more time reviewing insights extracted from audit findings. Moreover, they believe audits provide valuable business insights and deliver a valuable outside perspective. The majority of C-suite executives and audit committee members surveyed agree that audits of financial statements identify opportunities to improve business performance. The Deloitte Audit Value Survey indicates this. Lara Abrash: Innovation is clearly driving audit quality to new heights. Q: How can senior management and the board make optimum use of insights derived from audit innovation? Instead, the organization’s entire population of securities can be analyzed, allowing the audit team to, for example, spend more time reviewing hard-to-value securities. Typically, auditors would pull that information on a sample basis. The results can then be plotted on a heat map that identifies the risk associated with each type of investment or transaction.
#Gaining insights drivers
Lara Abrash: An analysis can be run on all of an organization’s investment data, including the nature of the investments, the drivers of the valuation, recent trades, liquidity of a security, and whether the security requires hand pricing or models. Q: How does a risk-based approach to a financial statement audit work in practice? There are advanced technologies that can create a workflow to deal directly with third parties so audit teams can focus their time and effort on investigating outliers and exceptions.
#Gaining insights manual
Traditionally, this is a manual process that requires follow-up of confirmations by auditors and sign-off of each confirmation by someone in the controllership group.
During the audit, it is not unusual for external auditors to confirm thousands of balances with third parties. Identifying high-risk areas in a timely manner and gleaning additional insights during the normal course of the audit can provide CFOs and controllers time to think critically about auditors’ questions and findings.įor example, consider how cash confirmation technology might be used during an audit of an investment firm. Risk-based methodologies also can be used by auditors to target areas of concern earlier in the audit process by directing the auditor’s focus to areas that require management judgements and assessments and more complex areas such as revenue recognition, leases, and contracts. The power of advanced analytics encourages the use of risk-based methodologies during audits, moving auditors away from manual, sometimes low-value tasks and helping them focus on areas of interest, such as accounting policies that may not be applied properly. These technologies allow for risk sensing, cognitive analysis, real-time access and near continuous analysis of client data. Lara Abrash: Today’s most far-reaching innovations, such as using predictive analytics to identify high-risk accounting areas and artificial intelligence to spot patterns in financial transactions, are bringing data-driven processes into the standard audit practice.
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