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Five Tips for Effective Data Visualization in Internal Audit

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data-analytics-caused-extra-work.pngAn audit is only as good as your ability to communicate its results. A lot has been written about improving audit reports (see this recent article from Internal Auditor magazine or this guidance from The IIA). However, a critical component that is often overlooked is how to effectively visualize the data you have collected to lead your audience down the right path.

Data visualization is simply the graphical or pictorial representation of data used to enable decision-makers to more easily grasp complex issues or understand patterns, trends, and correlations that would be difficult to detect in narrative only. The problem is that too many auditors believe that by simply dropping a bunch of data into a chart and pasting that chart into an audit report, they have succeeded in communicating something important. Too often, they have only succeeded in creating something that makes perfect sense to them, but results in confusion or miscommunication to stakeholders reading the report. Consider the simple example at right.

The sad truth: I didn't do anything special to create this chart. It is actually one of the default templates that comes with Excel. One rule you should establish when considering a data visualization strategy is to not rely on default templates. You might use them as a starting point, but if data is worthy of being included in an audit report, then it is certainly worthy of taking a few extra minutes to design something more appealing.

Here are a few things wrong with this design (you may find more). First, it is open to interpretation as the text on the chart doesn't give enough context and could easily be misinterpreted that data analytics are bad. There is an unnecessary use of color. When used appropriately, color can be very powerful. In this case, it is distracting at best and likely a bit misleading. The human eye is naturally drawn to certain colors and certain colors have built-in meaning. In this case, the default settings highlighted the "Don't Know" category in red, a color that naturally draws a negative reaction. Is that the data element stakeholders should be drawn to? Additionally, there is more distraction on the chart by the duplication of the categories both around the chart and in the legend. Finally, what story does this chart tell?

Now consider an alternative design (see right). First thing, the pie chart has been eliminated. Pie charts, especially 3D pie charts, often lead to a skewed view of the data, especially as more slices are added. Side note: avoid 3D charts as they add unnecessary visual complexity. Second, the chart uses color sparingly, only to focus attention on the data point that matters most. Last, the chart title leads you down the path you should take. In this case, the chart illustrates that poor data analytics design causes extra work and the likely solution is to hire the right expertise. This is purposeful in that rather than letting readers see a ton of data and come up with their own interpretation — which will be biased based on their own feelings about the subject or what they have been told previously — I am leading them to the conclusion I want them to reach based on the evidence collected during the audit.

This is just one simple example. For some true expertise in this area, I recommend a book titled Storytelling With Data by Cole Nussbaumer Knaflic.

From reading Knaflic's book (and hearing her speak at the 2017 GAM conference), other resources, and my own experience, here are five tips for effective data visualization in internal audit:

  • Understand your audience. First and foremost you need to understand your audience. Who will be using the charts? How much time are they willing to spend deciphering your message? What design and visual cues will grab their attention and drive them to take action? It is natural human behavior to create a chart that looks good and means something to you. The challenge here is creating something that looks good and means something to your audience. You don't need to be convinced of anything, but management and the audit committee do.
  • Have an objective. Another natural human tendency is to seek acknowledgement of the hard work performed by letting everyone know just how much effort went into reaching the end. In data visualization, this means that charts and graphs are added to show off the vast amounts of data that was collected. Resist this urge. Extra charts, graphs, data, or narrative only distract from your key message and give readers opportunities to focus on things that don't matter. Each chart or graph you add to your report should have a specific objective. Ask yourself, what message does this convey? What action do I want as a result of including this data? How could this be interpreted in different ways and what changes should I make to avoid misinterpretation?
  • Keep it simple and focus on what is important. Simple is always better, both in design and in communication. Start your charts and graphs with the minimum amount of everything (color, text, data, etc.) and only add elements that are necessary to ease comprehension or drive the behavior you are looking for.
  • Design for comprehension. Going back to the definition I gave at the beginning, data visualization is simply the graphical or pictorial representation of data used to enable decision-makers to more easily grasp complex issues or understand patterns, trends, and correlations that would be difficult to detect in narrative only. For this to work, data needs to be visualized in a manner that is easy to comprehend. Building highly complex charts and graphs defeats this purpose. If you have a lot of complex data that needs to be shared, break it down into easily digestible components and lay these components out in a way that leads the reader where you need them to go.
  • Tell the story. Data visualization is useless if it doesn't drive the behavior you need. To use data visualization correctly, it needs to be an integral part of the overall story you are trying to tell with your report. Most importantly, data should not just be dumped on the reader with insufficient context. Instead, use the data to steer your audience toward your ultimate goal.

Data visualization is an important tool for effectively communicating audit results. When done well, it can enable your stakeholders to more easily grasp the complexities of your audit and drive them to the right actions that will strengthen the organization.

That's my point of view. I'd be happy to hear yours.

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