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Data Analytics

Data analytics and intelligent automation are becoming increasingly important tools for internal audits. They provide large statistical samples that improve risk profiling and help auditors quickly monitor audits while looking for fraud. By analyzing large amounts of data, these tools can not only investigate the root causes of issues but also anticipate future risks by assessing more data than human analysis alone. To utilize these tools effectively, auditors must ensure data quality, independence, security, and properly understand correlation versus causation when analyzing results. Open-source frameworks like Apache Spark and R programming can help auditors develop solutions to analyze big data.

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95 views

Data Analytics

Data analytics and intelligent automation are becoming increasingly important tools for internal audits. They provide large statistical samples that improve risk profiling and help auditors quickly monitor audits while looking for fraud. By analyzing large amounts of data, these tools can not only investigate the root causes of issues but also anticipate future risks by assessing more data than human analysis alone. To utilize these tools effectively, auditors must ensure data quality, independence, security, and properly understand correlation versus causation when analyzing results. Open-source frameworks like Apache Spark and R programming can help auditors develop solutions to analyze big data.

Uploaded by

someone soemwhere
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© © All Rights Reserved
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Download as PDF, TXT or read online on Scribd
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DATA

ANALYTICS
THE FUTURE
OF
INTERNAL
AUDITS 
How is Data Analytics and Intelligent
Automation making its way into the world of
Internal Audit?
JUNE 12, 2019

PRESENTED BY NANCY AGARWAL


WHAT IS DATa Analytics?
Data analytics is the science of
analyzing raw data in order to
make conclusions about that
information. Many of the
techniques and processes
of data analytics have been
automated into mechanical
processes and algorithms that
work over raw data for human
consumption.

WHY DO WE NEED IT IN ITERNAL AUDITING?


Data Analysis is at the very core of internal auditing. And now, with the advent of
artificial intelligence, data analytics is a can’t-miss asset in the field of internal
auditing. Data analytics has great promise in the world of internal audit because it has
many benefits for improving the functionality of the auditing procedures. It massively
helps in risk profiling by testing via the various simulations available. It provides large
statistical samples that go on to improve the results of risk profiling which greatly
affects the company. Data Analytics also substantially help in the execution of the
audits. The sophistication of the Artificial Intelligence helps in quick monitoring of the
audits and is good at looking out for the indications of fraud. Moreover, data analytics
incorporated in internal audits will help in anticipating future risks enormously. They
help by not only investigating the root cause but due to the intangible accuracy, they
can assess bigger sample sets to come to conclusions that human analysis ever could.
This is perhaps the biggest point in the favor of data analytics.
INTERNAL AUDITING
This helps in protecting the company’s
assets significantly. Internal audit is a
good governing force because it assesses
the working of the company heads and
ensures they are working efficiently
towards the company’s growth.
One of the most important factors in Furthermore, it ensures that the company
the smooth and efficient growth of a is well equipped and adheres to proper
company is the internal audit laws and regulations. So, it is fair to
department of that company. It plays
assume that internal audits play a key
a vital role in the reduction of waste
for the company. Additionally, it also role in any organization and improving
helps in financial savings and legal their efficiency will greatly add to the
compliance of the company. It sets the growth of the company itself.
roots for the company’s uphill
nurturing.   It gives us an objective
insight if the internal workings of the
company and thus, a fair chance to the
company to make relevant changes.
Due to its continual nature, it
constantly gives us an idea about how
the different risks and policy changes
are affecting the company in real
time. 
HOW DOEs Intelligent automation and
data analytics help in Internal audit?
QUality
High quality, impactful analytics are an asset to the business and a boon to the credibility of internal audits.
Unfortunately, trust can be rapidly lost due to inaccurate or unreliable results, which can be caused by poor
quality data; incorrect coding; poor or misleading presentation; and failing to answer the question. It is therefore
imperative that testing and quality assurance (QA) procedures are put in place that take into account the ‘quality’
risks attributed with developing an analytics solution.

independence
It is imperative that use of data analytics must preserve the internal auditor’s independence and objectivity. The
nature of the outputs delivered by the analytics cycle can give rise to specific complications when it comes to
meeting these principles. Careful consideration must be taken to address a number of issues that can affect the
independence of the audit work.

Data security and processing of sensitive data


As large data consumers, the internal audit team is exposed to the same risks around data security and privacy
that it examines for its stakeholders. Managing these risks becomes doubly important when dealing with the
additional complications arising from jurisdiction-specific regulation and cross-border issues.
HOW to jump-start data analytics in
internal auditing
Clean and normalize the data. Internal audit has to understand data collection: Know the people
collecting the data, the sources, and the analysis processes, to be confident in the end-product. Data used
for analysis must be correct, consistent, complete, free from duplication, with inaccurate or irrelevant
parts deleted. Clean data is easier to combine with different data sets to gain deeper insights.
Normalization, which simply means looking closely to assure units of measure are comparable by
transforming all variables to a specific range, is a prerequisite for effective analysis.

Deal with outliers. Auditors can't assume that a 99.3 percent positive return means things are good,
because that 0.7 percent might be a significant issue that won't be known until you dig in. Outliers should
not be ignored, they should be understood. They may be telling you something important. Seize the
opportunity to discover the reason why things didn't come out the way you thought they would.

Clearly visualize the data. It is incumbent on auditors to communicate audit results succinctly and
clearly, and that includes graphs and charts carefully constructed to convey maximum value. Data
visualization also should be leveraged early in the analysis process, as it enables pattern identification.

Recognize when you should not use data. More data isn't necessarily better, as not all data will help
achieve audit objectives. Realize that you can't use data for everything, and sometimes instinct and
experience are the best tools for auditing a certain area. Also, similar to correlation versus causation,
data can often appear to have more meaning than it really does. Beware the danger of jumping to
conclusions that ultimately may not be supported by the data.

Understand correlation versus causation. Correlation describes the relationship between two variables,
while causation speaks to the idea that one event is the result of the occurrence of the other event. It is
easy, and too common, to assume causation when there is simply correlation in the data and individuals
viewing the data will be influenced by past experience and their own personal biases. 
OPEn source  frameworks as solutions
to big data tool development
Apache Spark
Apache Spark is the alternative — and in many aspects the successor — of
Apache Hadoop. Spark was built to address the shortcomings of Hadoop and it
does this incredibly well. For example, it can process both batch data and
real-time data, and operates 100 times faster than MapReduce. Spark provides
the in-memory data processing capabilities, which is way faster than disk
processing leveraged by MapReduce. In addition, Spark works with HDFS,
OpenStack and Apache Cassandra, both in the cloud and on-prem, adding
another layer of versatility to big data operations for your business.

R Programming Environment
R is mostly used along with JuPyteR stack (Julia, Python, R) for enabling wide-
scale statistical analysis and data visualization. JupyteR Notebook is one of 4
most popular Big Data visualization tools, as it allows composing literally any
analytical model from more than 9,000 CRAN (Comprehensive R Archive Network)
algorithms and modules, running it in a convenient environment, adjusting it on
the go and inspecting the analysis results at once.

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