THE role of data analysis in internal audit

As the complexities of businesses and its day-to-day transactions have increased over the last few decades, so has the need to upgrade from the traditional internal audit approaches. Over the last few years we have seen how internal auditors leverage on data analytical techniques and methodologies to bring insights into the business and its risks and controls. 

What is data analytics?

Data analysis is a method to interpret, evaluate and investigate into details of the available population of data, to obtain information useful to make informed decisions. Data analysis provides insights into operational aspects, business processes, risks and controls etc. Data analysis can be enhanced with the use of tools and technologies like data mining, advanced Excel, ACL etc.

What are the different types of data analysis?

• Descriptive analysis – provides a description of historic data analysis and helps in identifying “what has happened”

• Diagnostic analysis – helps in identifying “why” something has happened, by performing deeper analysis of historic data

• Predictive analysis – as the name suggests, this analysis helps in predicting the future outcomes or events, based on past performances and trends

• Prescriptive analysis – identifies the course of action based on what has happened, why it has happened and what are the estimated future outcomes or events

Steps in data analysis process 

Why is it important to use data analysis techniques in internal audit?

• Helps in understanding huge volumes of data and deriving useful information for performing risk analysis

• Provides more accurate results, as the analytical results are based on entire population and not on samples selected

• Helps in providing higher level of operational assurance to the management

• Helps the internal audit process to be more time effective by eliminating repetitive and manual tasks traditionally performed by internal auditors

• Provides quantifiable results to aid better decision making

• Increases creditability of risk analysis and internal audit results