Data Analysis is Key to Success

Data analytics are about one thing—extracting actionable intelligence and valuable
insights from data to provide stakeholders with a deeper understanding of their
business. By capitalizing on the wealth of data organizations have available, Internal
Audit can provide greater assurance across the three lines of defense and position
themselves as a trusted partner.

Today, many internal audit teams rely on a single individual or a few specialized data
analytics staff to support their data analytics program. This means internal auditors have
to pick and choose which audits to incorporate data analytics into. Senior leaders and
stakeholders need to determine if they are willing to accept this level of risk. Is your
organization comfortable knowing that on half of your audits your audit findings don’t tell
the complete story? With the volume of data in your organization, doesn’t it make good
business sense to look at the entire data population rather than just a sample?

Data analytics is also the cornerstone of Internal Audit detecting fraud. Traditionally,
internal auditors used sampling to make assumptions about an entire data set. The
downside is that the sample is not always representative of the whole population, which
can lead to risk. The other disadvantage of sampling is that fraud often can’t be
identified by just pulling out a few transactions to review. Looking at the entire data
population provides internal auditors with deeper insight into business operations and
helps internal audit teams identify potential fraud more readily.

10 best practices to kick-start your data analytics

program
Are you one of those organizations that whenever the word “analytics” comes up,
everyone takes cover and points at the person who’s been allocated as your “analytics
champion.” Internal audit has fostered that environment, and it’s going to have to
change if internal auditors are going to stay relevant. To do this, internal auditors must
recognize that there is a need for a change, and that need has to be stronger than the
perceived difficulty of changing. We've built up this barrier that says data analytics is
really hard, but what it really requires is a shift in mindset.

When you talk to most auditors about the advantages of performing data analytics on
100 percent of the data set versus pulling a sample, they understand the value. Here
are 10 best practices that can help your organization break through the barriers when
adding a data analytics strategy to your auditing program.

1. Develop a vision and plan

It’s important to establish a clear vision for the desired end-state and a detailed plan to
help you get there. To help define your vision, ask “Where do we want to be a year from
now? Two or three years from now?” Talk to peers at other organizations that you
believe are further along the maturity curve to get ideas about how analytics can improve
an audit team and its product.  Once you’ve decided on your vision, the next step is to
develop your plan. This is a tactical approach to the steps you need to take to achieve
your vision. Your plan could start with something as simple as having all internal
auditors start performing completeness and accuracy checks on their data. Whenever an
internal auditor gets a spreadsheet, they have to perform these data checks—and then
build from there. Finally, and most importantly, make sure to communicate your vision.
When you speak something out loud, it makes it that much easier to become a reality.
 

2. Get buy-in from the top

Make sure the Chief Audit Executive is fully on board and voices his or her support.
Oftentimes, when a new solution is brought in, senior management and stakeholders
expect things to change overnight. It’s important that you not only have their buy-in but
set expectations so that everyone fully understands what they are supporting and they are
supporting all of these best practices throughout the change process.
 
3. Determine success
What is success? What does it look like to your organization? In addition to your audit
plan, it’s important to set targets and design Key Performance Indicators (KPIs) to
monitor progress. There are several KPIs to choose from, so make sure you select those
that are most relevant to the objectives and evolve with the plan.
 

4. Appoint a lead
There’s often talk about champions, but a lead is different. A lead is a person who's
monitoring the KPIs and ensuring that the internal audit team is progressing according to
plan. A lead is similar to a project manager appointed to keep the internal audit team
moving in the right direction.  The lead can be the leader of the audit team, or another
member of the team but who visibly has the full support of the CAE.
 

5. Appoint champions
Champions are the internal auditors that have a natural lean towards analytics. It doesn’t
mean they are performing all of the data analytics, but they coach other team members in
their progression toward using more analytics in their audits.
 

6. Provide training
It’s important to provide an appropriate level of training for champions and users, not just
during the initial implementation of your data analytics program but offering ongoing
training that maps to your plan as well. Training is not only the “how”, but also the
“what”.  “What” should I be looking for and “what” tests should I perform as well as
“how” do I perform those tests using the tools we have.
 

7. Identify quick wins

When internal auditors are first getting started with data analytics, it's always a good idea
to deliver a few quick wins to get buy-in. If you pick the hardest, most difficult audit to
perform data analytics, you are reinforcing the mindset that data analytics is hard. It helps
to find a few simple areas or tools to build momentum and demonstrate initial success.