As information systems advance, data generation increases. There was a time humans owned and generated data. But for the past few years, the technology trends have been changing. With these changes, the definition of data has broadened. For instance, it’s not necessary for data to have a structure, like having the same data type or organization pattern. In other words, the data may contain different data types that are randomly arranged. Machines can generate information as well. Data can also exist outside the corporate boundaries. Data is growing as time goes by. We’re using the term “big data” to describe this portfolio of data. So, while thinking about how this data can be managed for better reporting, you may wonder, how does big data come into the picture?
In this post, we’ll discuss how big data has improved the audit process. But before that, we’ll get to know what big data is.
What Is Big Data?
In simple terms, a huge amount of data is considered big data. Big data is a collection of high volumes of data that grows with time. This growth is exponential. It defines large data sets, which, on analysis, reveal trends, patterns, or associations. They relate to human interactions and behavior. Big data includes data sets of high complexity and volume. However, without analysis, big data doesn’t yield much value. But when we optimize data, managing risks is easier. Optimizing data can also increase profits. For instance, your optimized financial data report shows why your project or a certain task is falling back and allows you to take preventive measures. Big data makes auditing easier by optimizing data and many other roles. In the following section, we will get to know how big data does that.
How Big Data Has Improved the Audit Process
The economy is tough and uneven in modern times. This increases the role of auditors in the financial market. Users of financial statements are looking for better insights. Therefore, audit firms have to provide more value to customers. Moreover, they strive to make their system robust. Big data improves audits by improving product quality.
Big data and analytics provide great development opportunities. Most companies have recognized this. They’re ready to leverage the benefits. The audit area is a sector big data can transform well. In fact, big data has been improving the audit process for a long time. On that note, let’s take a look at how big data has improved audits.
1. High Quality
Big data and analytics provide better product quality by providing better audit evidence, financial reports, and relevant business insights. The transformed audit process has expanded beyond just sample-based testing. It also includes analyzing an entire population of data.
As a result, business insights are more relevant. Auditors can provide better financial reports. This, in turn, increases product quality. Better financial reports also give better value to customers.
2. Better Risk Assessment
Big data has benefited audits in risk assessment. For instance, analytics and big data combined can help in data mining. Access to the entire database is of great benefit. You can have an in-depth idea about the data sets and chances are you may discover patterns. By finding out how a large chunk of data behaves, analytics can enable data mining and obtain key elements.
This process helps auditors focus on specific areas of concern. Similarly, they can point out areas of high risk with strong evidence. Thus, big data helps audits by providing a better assessment of risks.
3. Simultaneous Streamlining of Different Processes of a Firm
There are many factors affecting the auditing process in a firm. One of the main factors is the quantity of data a company produces. Secondly, the amount of data available to a company also plays an important role in different processes. In the past, companies used paper trails.
Proper IT records and cloud storage are replacing them. The growing demand for immediate information is growing from the stakeholders’ end. Big data brings all these factors together and mines information to streamline various processes.
4. Greater Efficiency in Auditing
There was a time when data evaluation was only about monitoring small data samples. Big data enables the monitoring of complete data sets. It also enables frequent and continuous evaluation. Thanks to the advancement in technology, we can also use unstructured data. As a result, the outcomes are thorough when we take into account every little detail from raw data.
For instance, big data provides a detailed insight into the shopping habits of customers. When companies are aware of beliefs and purchase patterns, they can make better customizations for customers and increase sales. Big data and cloud technologies provide better control over data. They make information manageable and teams can easily store it. This makes the audit process more efficient.
5. Provides Access to Outside Data Relevant to Auditors
Big data helps auditors look for anomalies and add better insights. Apart from this, an auditor also gains access to unlimited relevant information. For instance, social media platforms can provide a lot of data residing outside of the organization. But if the data is related to the company, it’s useful. Usually, firms rely on information residing in the systems within. However, outside data provides insights into issues that might affect a business.
6. Ensures Compliance With Guidelines
Businesses usually end up spending a lot on audits. The leading reason for unexpected expenditures is human error. Sometimes, it doesn’t matter how careful the employees are. People make mistakes and businesses can go out of compliance. Big data offers a solution by automating the process. It targets different portions of auditing and automates repetitive tasks. Moreover, there are some guidelines every company has to stick to. Automation with the help of big data can help auditors set controls. This way, they can also monitor that a firm follows guidelines.
How to Use Big Data in Auditing to Streamline Audits
Big data expands the scope of a project. Auditors can use it to compare huge data chunks. While analyzing massive chunks of data, the team members are able to pick out loopholes. Some of them are about security. When we know where the security system lacks, it’s easier to detect fraud. Additionally, big data streamlines the reporting process. Data aggregation and management are two important processes of a company.
Consider some prerequisites before you decide on leveraging the benefits of big data for audits. Auditing involves analysis of different data sets. Auditors have to check the capacity, timeliness, and accuracy of the data sets. The information has to be reliable for auditors to make a sound decision. Investment, risk, and compliance decisions are very crucial. Thus, auditors have to prepare audit reports beforehand.
To streamline audits, there is a series you have to follow. Since you’re using big data, have an end goal. This will help you take steps to utilize the full potential of a business. Each team member should have sound technical skills. Secondly, use appropriate resources. Make a plan and follow it step by step.
How Knowledge of Big Data Can Help Auditors
The auditing industry is facing massive transformation. Especially, the Fourth Industrial Revolution, or digitalization, has had a huge impact. The business world keeps on experiencing rapid modifications. The use of cloud computing and interconnected devices, as well as increasing use of AI and machine learning, has changed the way of a company’s operation. For example, there are many retail- and logistics-based industries that are using Salesforce Marketing Cloud for advertising their products, thereby replacing the good old manual advertising. Thus, it’s important for companies to adapt. Auditors must upskill themselves to stay relevant in the industry. They need to know big data and analytics, as they’re prerequisites for some employers.
If auditors stay complacent, they can become obsolete over time. It doesn’t matter how much you’ve learned in college. Businesses value auditors who have updated knowledge, including knowledge of big data. As per a Deloitte survey, big data and analytics will gain more relevance. This is likely to happen in the coming three years.
Every company encounters technical deficiencies. This can happen even when the entire team is careful. Thus, most firms prefer to hire auditors with the knowledge of big data. They’re able to meet technical shortcomings better. This way, the firm can meet the expectations of the stakeholders. At the same time, it can also provide more value.
Barriers to Adopting Big Data in Auditing
Even though we know how big data benefits firms, not many can use it as they like. The barriers to implementing big data in auditing make it difficult to use. Let’s explore some of them.
Complex Data Extraction
Ledger data is the main focus of data extraction. But with big data, companies have to obtain sub-ledger data. A general ledger usually has historical data going back for a long period—for instance, the whole history of transactions. Sub-ledger data is a detailed subset of the general ledger data. Since the data volumes are large, this makes the data extraction complex. As a result, it also makes it difficult to decide the volumes of data for processing. Moreover, not all employees have the skills to adopt big data in auditing.
To guide auditors to use big data, a data standards framework is important. Many business sectors are taking the big data plunge. But consider auditing. This profession takes more time in adopting big data in the regular course of action. This is because auditors are already steeped in a certain process. Adopting a different process or technology always consumes some time. The lack of updated standards for validating client data delays the implementation of big data in auditing. Another factor also contributes to the delay. Auditors are known to be slower than other professions while taking the leap of faith in big data.
Whenever a new practice comes into the limelight, it becomes vital to educate team members about it. The same goes for big data for auditing. But since most big data implementations focus on other fields like healthcare and technology, auditing remains on the backstage. Companies have to educate auditors so that they can apply big data logic using their theoretical audit background.
Spur Company Growth Using Big Data in Audits
With the help of big data, businesses can make better decisions. Customer demands are always evolving. This calls for a need to reduce operational costs. Moreover, adapting to user needs is also equally important. Analyzing real-time data is a valuable asset. Thus, big data can be a valuable asset to spur growth. Big data in audits enables businesses to unleash their true potential. It increases processing velocity. Thus, big data uncovers vital insights into the business.
Audit trends have always evolved and will continue to do so in the future. Meeting stakeholder demands can become tough. It usually happens if the audit process isn’t up to date. For a robust audit, in-depth knowledge of big data is beneficial. Auditors nowadays are leveraging IT. But the field needs more effort for a large-scale change. Firms should plan ahead and focus on overcoming barriers. Innovation and consistency are the keys to a transformed audits system.
This post was written by Arnab Roy Chowdhury. Arnab is a UI developer by profession and a blogging enthusiast. He has strong expertise in the latest UI/UX trends, project methodologies, testing, and scripting.