A Tool to Boost Business Intelligence
CPAs deal with volumes upon volumes of client information. Data analytics can help make sense of it.
Businesses and their advisors seek creative ways to make sense of enormous amounts of information, or “Big Data”, to solve inefficiencies, detect fraud and enhance profitability.
With many attest clients processing their transactions electronically, CPAs and other technical consultants are now getting involved in Data Analytics — the art and science of processing Big Data to discover and analyze patterns, identify anomalies, and extract other important information embedded in data through analysis, modelling and visualization relative to human behavior and interactions.
Data Analytics can be utilized to enhance many professional services, including audit and review engagements, forensic investigations, consulting engagements, and assisting clients in business decisions. For CPA firms, Data Analytics is a powerful tool because it can help auditors achieve 100% coverage in substantive testing, which decreases engagement risk while increasing efficiency and realization.
“Integrating Data Analytics into their practice can let CPAs provide additional value-added services to existing clients while attracting new ones.”
-Salvatore A. Collemi, CPA, Collemi Consulting & Advisory Services, LLC
At the same time, demand is growing for Data Scientists, or individuals that have strong analytic abilities and are skilled in computer coding. Data Scientists understand how to use Data Analytics to process Big Data efficiently and aesthetically, blending form with function.
When data is received in a format that’s not user-friendly, for example, data analytics can make it easier to use. In one case, a CPA firm that’s a Collemi Consulting client was presented with more than 100 individual journal entries — necessary for substantive purposes — that were not only presented in PDF, but were structured in a variety of different formats. The CPA firm essentially had information but did not have an efficient way to use it, since manually converting the journal entries into a standard, usable format would be extremely time consuming.
Instead of reformatting each entry, we automated the process by devising a computer code that could electronically identify and extract information directly from the General Ledger, which already presented with a uniform format.
This enabled the external auditors to efficiently read and utilize the information; and as a bonus, the Collemi Consulting code also summarized the P&L and balance sheet effects of the 100-plus journal entries.
Integrating Data Analytics into their practice gives audit professionals an opportunity to provide additional value-added services to existing clients while potentially attracting new ones. Audit professionals who want to integrate Data Analytics into their practice generally have three options of doing so: devoting a lot of time to understanding third-party specialized computer aided audit tools (CAATs) software, some of which utilize Artificial Intelligence (A.I.); take on the long-term commitment of hiring a Data Scientist in-house to build custom applications, or outsource the task to a Data Lab.
Data Analytics can decrease engagement risk while significantly increasing efficiency and realization.
Regardless of the approach they select, auditors will be able to harness the power of Data Analytics to automate numerous attest procedures, including tests for: non-standard journal entries, accounts receivable, accounts payable, payroll, travel and entertainment expense reimbursements, fixed assets, check registers and cash disbursements, and revenue recognition. Data Analytics can also enhance and digitize such activities as stratification, risk score assignments, multi-dimensional analysis of transactions, data joins, data appends, data aggregations, data visualization, and of course, taking on large data sets that previously could not be analyzed because of constraints like time and staff size.
As businesses continue to face more pressure to process transactions faster — with less staff and other resources — their vulnerability to fraud or errors continues to increase. An effective Data Analytics strategy can address this potential vulnerability, and Engagement Team Leaders — including Partners, Managers, and In-Charges — should consider the benefits of embracing automation while determining the approach that best fits their firm’s practice and budget.
Collemi Consulting & Advisory Services, LLC strives to promote and enhance audit quality to U.S. and international public accounting firms, private sector, attorneys, valuation specialists, standard-setters, regulators and other organizations that influence the public accounting profession.