Assessing the Impact of Data Analytics

State Board Report

September 2016

A paper on “Exploring the Growing Use of Technology in the Audit, with a Focus on Data Analytics” has just been released for comment by the Data Analytics Working Group of the International Auditing and Assurance Standards Board (IAASB) http://www.ifac.org/system/files/publications/files/IAASB-Data-Analytics-WG-Publication-Aug-25-2016-for-comms-9.1.16.pdf. This concise document underscores the major impact the increasing use of technology is projected to have on the analyses entities will expect their auditors to perform. The document notes work on this topic is also being carried out through the Rutgers AICPA Data Analytics Research Initiative, the Institute of Chartered Accountants of England and Wales series of papers to facilitate dialogue and CPA Canada’s Audit Data Analytics Committee. The Working Group also points out the Public Company Accounting Oversight Board is monitoring developments in this area.

While current International Standards on Auditing (ISA) do not prohibit the use of data analytics they need to continue to be relevant, the Working Group underscores. They perceive a risk “associated with the use of new and innovative techniques for which there is not a strong framework within the standards.” What is being recommended are auditing standards that are able to accommodate future developments but that do not require continual change.

The working group sees a direct link to what needs to be incorporated in the education curriculum for auditors: “In the not too distant future, a re-skilling of a relatively large proportion of today’s accountants and auditors will be necessary to realize the potential on a broad scale. Today, auditors are incorporating the needed skills into the engagement team by adding the use of data capture specialists and data scientists to support the engagement teams.”

The paper lists unanswered questions including: “How regulators and audit oversight authorities maintain oversight in a rapidly changing area when the audit oversight authorities have little experience themselves of inspecting audits where the auditor has made use of data analytics and other technology innovations.”