In Practice TARYN ABATE Get Ready to Audit Smarter
use advanced audit data analytics (ADA). This is a gap CPA Canada is working hard to address and for a critical reason. “ADA is the future of audit,” says Kam Grewal, partner and quality implementation leader at Ernst & Young LLP, member of CPA Canada’s Audit Data Analytics Committee and member of the International Auditing and Assurance Standards Board’s data analytics advisory panel. Put simply, ADA is the process of analyzing data with the objective of drawing meaningful conclusions. “Traditional audits are based on sampling. Now, because of the power of technology, we can extract data and analyze 100% of the popula- tion, which means we have access to broader and deeper insights on trends, patterns, anomalies and control break- downs while focusing on high-risk areas,” says Grewal. The result: a higher-quality audit, greater confidence in financial reporting on the part of management, audit committees, regu- lators and investors, and a better experience for clients and audit teams, which are able to drill deep into data at the transac- tion level and ask more meaningful questions. This has been the case for EY, which has been investing in
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ADA for several years. “The audit committee packages we put together today are more visual and interactive. [They also] drive better conversations on areas such as risk, systems, processes and controls, and provide enhanced business insights well beyond the audit,” says Grewal. For practitioners who haven’t started on the ADA journey,
Grewal has a few key pieces of advice. First and foremost, “the train has leſt the station,” he says. “Globally, standard-setters have made ADA a priority because they want standards to be responsive to what’s happening in the marketplace. If you want to stay relevant to your clients and your people, you have to make ADA a priority, too. This is true for all firms, regard- less of size.”
Here is more advice from Grewal. Exhibit strong leadership. Moving to ADA is really about driving behavioural change and getting people excited and motivated. This can only happen if leadership accepts that the status quo is not an option. Plan early for data capture. Data-extraction soſtware, which is readily available in the marketplace, is scalable. Improvements in technology have made the data-capture process much easier.
24 | CPA MAGAZINE | NOVEMBER 2017
RECENT CPA CANADA SURVEY of 394 auditors across the country reveals that while almost all (92%) use some form of analytics (largely Excel-based tools), only 20%
Have a dedicated person or team responsible for sharing knowledge and best practices on data capture. This can be an employee of the company or a consultant who comes in on a part-time basis. Take a transitional approach. Integrating ADA into your audit process does not have to be an all-or-nothing proposition. For example, in the first year, start with applying analytics to jour- nal-entry testing or payroll. In the second year, apply ADA to revenue and receivables, then to inventory and payables. Educate your clients. Introduce management and IT to data capture early in the audit cycle to ensure the process is a smooth one. Make it part of audit planning.
“Because of the power of technology, we can extract data and analyze 100% of the population, which means we have access to deeper insights on trends”
CPA Canada’s Audit Data Analytics Committee is working to
drive the behavioural change needed to move the needle on ADA acceptance. “We are doing a pilot [project] with firms of all sizes embedding ADA throughout every stage of the audit,” says Grewal. “The objective is to share key learnings and best prac- tices with practitioners, management and standard-setters.” For more information about the committee and to access its
related resources, visit
www.cpacanada.ca/dataanalyticsinau- dit. CPA Canada works closely with the American Institute for Certified Public Accountants (AICPA) on guidance related to ADA. For links to the AICPA’s work on ADA, visit
www.aicpa.org/ AuditDataAnalytics.
TARYN ABATE, CPA, CA, CPA (ILL.), is a principal in the research, guidance and support group at CPA Canada
Photo: Paul Orenstein
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