data analytics

Question 1

define data analytics

Answer 1

examining data to draw conclusions

helps identify new opportunities
cost saving
faster and more effective decision making

Companies use both internal and external data, including quantitative and qualitative data.

Question 2

use of data analytics

Answer 2

-generate KPI from data
-statistical analysis to test hypotheses
-predicting market trends and consumer behavior
-analyse customer feedback to improve service
-advanced:Voice pattern recognition to detect customer dissatisfaction.
-law enforcement:Identify patterns in crime reports, such as repeat frauds across regions or countries.

AI helps faster analysis

Question 3

how can audit firms use data analytics

Answer 3

-use it to reduce audit risk
-add value to client services

audit firms can enhance effectiveness of large amount of client data stored in IT systems

auditors can extract, manipulate, and analyze data to understand client information and identify risks.

larger firms develop their own data analytics platforms
smaller firms use off the shelf packages

Question 4

benefits of data analytics to audit

Answer 4

-increased understanding thru a more thorough analysis and visual output like graphs
-better focus on risk

-consistency across group audits

-increased efficeincy, auditor can focus more on judgemental areas, larger testing 100% sample, save time
-easily manipulated data by auditors eg. sensitivity analysis on management assumptions
-increased fraud detection
-useful info for management, real value for client

-Converts data into structured formats understandable to auditors and clients.
-Tailors audit programs to client-specific risks.
-Integrates data into computerized audit procedures for efficient outcomes.

Question 5

data analytics in audit procedures example

Answer 5

• NRV testing – comparing the last time an inventory item was purchased with the last time it was sold and at what price
• Analysis of revenue trends by product and region
• Matching purchase orders to invoices and payments
• Segregation of duties testing by identifying combinations of users involved in processing transactions from the metadata attached to transactions

Question 6

challenges of data analytics

Answer 6

-lack of consistent standards across firms
-absence of specific regulations covering all uses of data analytics in audit
-competitive advantage for big firms, wider gap b/w small big firms
-data privacy and confidentialty risks
-client reluctance
-challenges ensuring completeness and integrity of client data
-compatibility issues
-training staff
-risk of poorly documented audit evidence
-long term data storage and accessibility issues