Since the start of my internal audit career, there's been constant conversation in our field about how we can use data analytics to become more efficient and effective. If conversation translated to execution, every aspect of our work would be infused with and informed by data. But many internal auditors will agree that when it comes to data analytics in internal audit, we're much further along with talk than we are with action.
For Transformative Results, Integrate Data Analytics Into Your Planning and Strategy
Right now, many audit functions apply some form of data analytics, although it's often on an ad hoc basis. Auditors often work in Excel sheets and select samples either manually based on ad hoc formulas or randomly. A couple weeks before an audit, they may incorporate data analytics for some light planning.
This inconsistent approach usually fails to tie in with the overall strategic vision of the chief audit executive and business, and it generally limits the value offered by internal audit.
To turn these ad hoc efforts into something more transformative, you need to tie data analytics into the internal audit group's overall strategy, which should ultimately feed into the larger strategy of the business. So, when you're planning for the coming year, it's essential to think about where you can use data analytics in your audits and decide what the scripts will look like.
When you apply data analytics in the planning phase, you can make sure you're looking at the right areas of risk. Then, when you begin to plan for individual audits, you can use the more transaction-level data analytics to inform your sampling procedures and the scope of your efforts. There's no need to make ad hoc decisions at this point — you've already operationalized data analytics, woven it into your strategy, and allocated the time for it. Now, success comes down to data acquisition.
Bringing data analytics into the planning phase also helps convert the inevitable skeptics. On the face of it, introducing data analytics can look like you're just making more work for your auditors. But when you incorporate analytics strategically ahead of time, allocate the hours for it, and tie it into strategy, you're not increasing anyone's workload. You're simply shifting time that would have been spent executing audits into the planning phase so you can make your audits more targeted, productive, and practical.
To Create Analytics That Work, Start With Your Internal Audit Vision and Use Data Analytics to Further It
The process of incorporating data analytics isn't like flipping an on-off switch. I know this from experience because our internal audit team at Crowe went through the process. Several years ago, we began building our own data analytics solution, Crowe Analytics Advisor for Banking. This project required a lot of thought and discussion.
We've all seen data analytics results that are interesting but not very useful. That's exactly what we wanted to avoid with our solution. It's easy to generate charts and tables, but we knew that the analytics we were using needed to generate relevant information and insights that would help us become better auditors.
We started with our established work programs, and we went through every step in our audit process to decide how data analytics could lead to a smarter approach.
The thinking we applied at Crowe can work for your organization, too. If you have a successful audit department, then you most likely have internal programs that have been refined over time. What better place to start with data analytics than with intellectual property that you've already built out and that you know is relevant to your audits?
So, start with the internal audit content you know you'll use and ask: How can we use data analytics to better achieve our goals? Take the program you're using and define a relevant suite of analytics that would help you accomplish what's needed. Then, weave those analytics into your planning for the year and beyond.
Ryan Singer, CIA, is a consulting senior manager at Crowe LLP in Columbus, Ohio and a 2016 Internal Auditor magazine Emerging Leader.
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