As the world grapples with the transformative forces of Big Data and AI, the audit profession finds itself at a pivotal crossroads. The rise of audit data analytics (ADAs), which uses advanced technology and data tools to analyze large sets of financial and other business data, is helping auditors spot unusual patterns and outliers, allowing them to better assess risks and ensure the accuracy of a company’s financial records. This is being developed and implemented at a level far beyond what has ever been possible before the introduction of AI. At The MindBridge Conference, a panel of global audit experts explored how audit methodologies are rapidly evolving alongside advancements in data analytics.
The Growing Importance of Data-Driven Methodologies
Audit standards continue to grow in scope and complexity, but that is a good thing. They are evolving to better integrate technology, including AI and data analytics, which ultimately improve audit quality. While organizations like the AICPA, IAASB, and PCAOB are updating their standards to reflect these technology-driven approaches, there is still much work to be done. It’s well understood that audit standards often lag behind development and innovation in the accounting profession.
Michael Hoose, Director at Cherry Bekaert LLP, emphasizes that human auditors won’t be replaced, but their skill sets will change. As AI and data analytics take on more repetitive tasks, auditors need to focus on areas that require judgment and professional skepticism – as they should. You can’t replace judgment with AI. However, he warns that firms that don’t adopt ADA will soon be priced out of the market due to inefficiency.
The Benefits of ADA: Efficiency and Risk Assessment
There are several tangible benefits of using ADA in audit processes – and more auditors need to embrace them. Mark Andre Paquette, Director of Technology Performance and Innovation at Mallette LLP, highlights the way tools like anomaly detection and transaction risk scoring are helping auditors spot trends and outliers in massive datasets. Instead of spending time on manual sampling, auditors can now use ADA to target higher-risk areas more effectively.
“We’re not just auditing the numbers anymore, we’re analyzing behaviors,” according to Graham Gardner, Audit Technical Director at Kreston Reeves. He explains how ADA shifts the focus to understanding patterns in data, leading to stronger evidence collection.
This frees auditors to engage in more meaningful conversations with clients, focusing on areas that require deeper judgment and probing—something AI will not replace. Firms adopting ADA can also offer clients valuable insights into their financial data, not just audit opinions.
Overcoming Challenges: Adoption and Education
Of course, the adoption of ADA isn’t without its challenges. Hoose points out that many firms hesitate to fully adopt ADA due to concerns over data privacy, explainability of results, and over-reliance on tools. However, he stresses the importance of ensuring technology enhances, but does not replace, the auditor’s judgment.
Paquette raises another key issue: client readiness. Clients need to be educated on the new tools and processes auditors are using. He shares, “We’re asking clients questions they’ve never had to answer before,” referring to the deeper insights ADA can generate. Educating clients on how these tools improve audit quality and provide them with better insights is crucial for a smoother adoption process. This brings home the fact that continuous data upskilling is an investment that companies today cannot afford to ignore.
Achieving Sufficient and Appropriate Audit Evidence
One of the key questions auditors face when using ADA is determining whether they’ve obtained sufficient and appropriate audit evidence. Gardner provides a compelling perspective on this by emphasizing the importance of persuasiveness in audit documentation.
“As auditors, what we’re doing is building a case about the financial information that’s in front of us,” Gardner explains. The audit file must clearly document the evidence collected and the reasoning behind the conclusions reached so that any independent reviewer can follow the audit trail and arrive at the same conclusion.
Many auditors struggle to tell the story of their audit work, leaving assumed knowledge undocumented. To address this, auditors need to step back and ask themselves if what they’ve done makes sense. This means applying critical thinking and skepticism, ensuring that every ADA output is evaluated, and that the auditor’s judgment plays a role in interpreting the results.
The Future of ADA: Integrating Substantive Procedures
The experts all agree that the future of ADA lies in its ability to perform substantive procedures, not just risk assessments. Gardner noted that ADA can analyze 100 percent of transactions in a dataset, helping auditors focus on transactions with higher risks of misstatement. If we can test 100 percent of transactions, the risk level, whether it’s low or high, doesn’t matter much — we’re doing the same work across the board.
This shift means auditors will spend less time on traditional “ticking and bashing” tasks and more time applying their professional skepticism to the areas that truly matter. As Hoose emphasizes, efficiency isn’t just about reducing hours, it’s about making the work more interesting and worthwhile for auditors. By automating repetitive tasks, firms can improve not only their audit quality but also the job satisfaction of their staff. This may be a solution to the ever-growing pressure on staffing resources in the profession.
A Journey, Not a Destination
It’s becoming clear that the future of ADA holds great opportunities for the audit profession. Auditors have the chance to become more innovative and continue to be relevant in the world of Big Data using new tools to offer enhanced services to clients. At the same time, these advancements are set to significantly improve audit quality and make a tangible difference in client engagements.
Ultimately, ADA represents more than just a technological shift—it signals a deeper transformation in how auditors think and operate. This isn’t the final destination but the beginning of an ongoing journey. The key to success will be continuous adaptation and innovation, ensuring auditors remain equipped to tackle the complexities of a rapidly evolving business landscape. This may be the silver bullet in addressing the growing gap between what’s expected in audits and what’s being delivered.
Want to see how audit data analytics is reshaping audit practices? Watch the full session from The MindBridge Conference 2024 and gain expert insights to enhance your approach to ADA.
The Global Panel of Experts
- Wenzel Ryan Reyes, Senior Director for Methodology and Audit Solutions, MindBridge, and formerly director of public company audits at PwC
- Michael Hoose, Director at Cherry Bekeart LLP (US), focuses on quality reviews and technical resources.
- Mark Andre Paquette, Director of Technology Performance and Innovation at Mallette LLP (Canada), known for his work on technology’s impact on the profession.
- Graham Gardner, Audit Technical Director at Kreston Reeves (UK), has extensive experience in integrating audit technology at Kreston Reeves and KPMG.
