As audit firms look to invest in big data, it will be even more critical to understand the implications of using big data and analytics on the audit profession. There are multiple ways in which data analytics would enhance the effectiveness and efficiency of external audits. From looking at the complete population, to finding trends, to allowing employees to do less routine tasks, there are multiple ways big data benefits audits. Big data would also enhance critical procedures performed for the sales and collection cycle. These benefits are not without some drawbacks that would need to be addressed by the profession.
There are many ways in which data analytics can enhance external financial statement audits. First, the auditors can begin to look at the complete population of data as opposed to taking samples of a given population (Murphy). This will allow the auditor to find potential outliers as well as fraudulent activities better. An issue that arises with the current sampling method is if the specific client knows or has an educated guess of what the auditors’ performance materiality is, then they can make sure their transactions and amounts of the fraud per is less than performance materiality. However, with big data auditors would be able to look at the whole picture to better understand the population and find possible outliers within the data set that would have been less likely to find with the current sampling method. This in turn, could help improve the assurance of the auditor for the financial statements at the same cost of what they are currently doing audits at now. This would not only help the effectives of the audit but also the efficiency of the audit since there would be less time s...
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...le it most likely will not be as reliable as confirmations, it would be a challenge to figure out how much the auditors could rely on it. Furthermore, higher education would most likely play a role in helping their graduates understand data and how to use technology to be not only more efficient but also ensure they are able to use sound professional judgement while using big data.
The implementation of big data into the audit profession will be welcomed considering the current business environment. While there are some drawbacks, big data has a role in audits. The main questions that will face the new wave of auditors will be in which ways and how big data can be used in the audit program. It’s clear that auditing standards, clients, firms, and higher education will all have to address these issues in the near future as audit adapts to the potential of big data.
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