Ask Joey ™ a Question

What is audit data analytics (ADA)?

According to the AICPA, Audit data analytics (ADAs) are a technique that can help you leverage current technologies and move toward a more data-driven approach to planning or performing an audit. 

This is basically saying that if you utilize the currently data and analytics tools that are currently on the market, then you’ll be able to better analyze data and spot anomalies in the data (i.e. potential misstatements or issues with the internal control environment). The most common tools available on the market include Alteryx, Tableau, Power BI, and Python. Some of the larger public accounting firms have designed their own data analytics tools.

The biggest benefit of audit data analytics is that audit sampling doesn’t need to be used because we can audit the entire population (yeah that is right, the entire population). So if the company has 1,000,000 sales transactions, we can test the full 1,000,000 rather than the 100 transaction that we “haphazardly” selected.

Now I know we have painted a beautiful sunset when it comes to data analytics in an audit, but the main issue is that most clients still don’t have quality data. To effectively use data analytics in an audit, the client needs to provide high quality data. That means that its accurate in the system, the data is complete, and it includes the necessary fields to be effectively used for audit procedures.

Now, don’t assume that you’ll work less hours in busy season. Technology and data analytics in audit will allow audit teams and accountants to work smarter and more efficiently.

You might also be interested in...

  • What is the relationship between volume and variable cost per unit?

    If the variable cost per unit remains fixed, then any increase or decrease in unit volume will result in an increase or decrease in total variable costs for a business. For example, if variable cost per unit was steady at $5, then if unit volume were to increase from 100 to 200 units, then total […]

  • How can variable sampling risk impact the efficiency or effectiveness of an audit?

    Audit risk is comprised of inherent risk, control risk, and detection risk. The level of substantive testing that the audit performs is based on detection risk, which is set after the audit team assesses inherent risk and control risk. Variable Sampling – Substantive Testing When the audit team is performing substantive testing, they will use […]

  • What happens if control risk is set too high or too low?

    Audit risk is comprised of inherent risk, control risk, and detection risk. Depending on how the audit team assesses control risk, they would set detection risk, which determines the level of substantive testing that should be performed. To assess control risk, the audit team would use attribute sampling to determine if the controls were operating […]