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State Board Report

July 2016

Although manual flowchart templates, comptometers and Osborne Computers are no longer part of CPA practice, the profession is continuing to adopt other tools, NASBA Regulatory Response Committee Chair W. Michael Fritz (OH) pointed out. "We haven’t changed how we actually do the audit for at least 50 years and we need to change. Our clients are using real-time data and we have to do real-time audits. The top 100 firms are using real-time data, and we, as regulators, have to know how to use real-time data as well," Mr. Fritz told the Boards at the Regional Meetings.

Through the use of data analytics, data can be selected for visualization that reveals where there are outliers and where there are risks. The current audit standards were written when the CPA would rarely do a 100 percent sample. However, Mr. Fritz observed, "Even if I look at 100 percent of the data, audit quality will still come down to the quality of the analyses and the judgments of the auditors. I still have to build a tool that does not have client bias in it. I have to document my understanding and make sure I am doing it appropriately." The AICPA is working with Rutgers Business School on a project to integrate data analytics into the audit process, the Rutgers AICPA Data Analytics Research (RADAR) initiative. He noted the minutes of RADAR’s monthly meetings are being posted on

State Boards can use data analytics via the NASBA CPE Tracker tool, which permits a 100 percent audit of the state’s licensees, Mr. Fritz said. Also using the Accountancy Licensee Database and the NASBA Legislative Tracking System can enable consideration of larger amounts of data.

"Consider using information found on the Department of Labor and Federal Data Clearing House databases to search for firms that may not be properly licensed in your state to perform specialized audits," he suggested.

"Firms, regulators and auditing standard setters acknowledge the challenge data analytics presents to how they can work together to enhance audit quality. State Boards need to be a part of the process," he said.

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