（2009）Maturing the use of data analytics.pdfVIP

Maturing the use of data analytics By John Verver, ACL Services Ltd. Just about every recent survey and report on trends affecting internal audit has ranked the areas of data analytics, continuous auditing and monitoring as being of high importance. Although continuous auditing and monitoring can theoretically take place without automation, there is widespread acceptance that technology, specifically data analysis technology, underlies these processes. How do these three areas relate to each other, and how do organizations implement these approaches? In practice, the use of analytics is usually part of a continuum. It tends to start off with ad hoc use, then move to repetitive use, and, finally, to continuous auditing and continuous monitoring. Let us take a look at the typical evolution in usage. The first stage in using data analysis is often performing a preliminary analysis as part of an analytical review or initial risk assessment. The objective is to gain an understanding of the nature of the transactions that have taken place within a given audit area. So, if auditors are working on the purchase-to-pay cycle, for example, they first need to obtain access to the transaction data for purchase orders, goods received, invoices and payments. They then examine the data using software to better understand what has occurred during the audit period and to identify any immediate indicators of risk or abnormality. In the case of a payroll audit, for example, this may mean analyzing all compensation payments for a given period by performing basic statistical analysis and finding that in one particular location, employees are receiving unusually large amounts of overtime or high pay rates. A bank audit example may involve stratifying mortgage interest rates to find that certain loan officers are issuing loans at unusually low rates. None of these analytics are particularly complex – they simply provide the auditor with some exploratory insight int