{"id":1571,"date":"2020-10-16T16:25:45","date_gmt":"2020-10-16T08:25:45","guid":{"rendered":"http:\/\/ehluar.com\/main\/?p=1571"},"modified":"2021-02-02T16:44:24","modified_gmt":"2021-02-02T08:44:24","slug":"using-data-analytics-in-a-financial-statements-audit","status":"publish","type":"post","link":"http:\/\/ehluar.com\/main\/2020\/10\/16\/using-data-analytics-in-a-financial-statements-audit\/","title":{"rendered":"Using Data Analytics in a financial statements audit"},"content":{"rendered":"\n<p>In an article under FOCUS, Lim Ju May,  Terence Lam and Wang Zhumei explained how data analytics can be  innovative and effective during audits even with complex businesses and  large volume of transactions.<\/p>\n\n\n\n<p>The article states that data analytics is defined as the science and art of:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>discovering and analysing patterns, <\/li><li>identifying deviations and  inconsistencies, and <\/li><li>extracting other useful information in the data, for the purpose of planning or  performing the audit. <\/li><\/ul>\n\n\n\n<p>The types of data analytics used in performing risk assessment procedures and further audit procedures <\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>descriptive analytics<\/strong> which asks \u201cWhat happened?\u201d. This is  characterised by traditional business intelligence and visualisations  with the usage of bar charts, pie charts, line graphs, generated  narratives and tables.<\/li><li><strong>diagnostic analytics<\/strong> examines \u201cWhy did it happen?\u201d. This is  characterised by techniques such as data discovery, drill-down,  correlations and data mining.<\/li><\/ul>\n\n\n\n<h1 class=\"wp-block-heading\"><strong>Prior to use of data analytics<\/strong><\/h1>\n\n\n\n<p>An inappropriate use of technological resources may increase the risk of over-reliance on the information produced for decision purposes, it may introduce threats to complying with relevant ethical requirements. Consequently, policies and procedures have to be in place to ensure that such technological resources are used appropriately. <\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>quality management<\/li><li>data security and confidentiality<\/li><li>human resources<\/li><li>preparing data for use, and<\/li><li>considering the relevance and reliability of data<strong>.<\/strong> <\/li><\/ul>\n\n\n\n<h1 class=\"wp-block-heading\"><strong>Usage of Data analytics<\/strong> <\/h1>\n\n\n\n<p>Data analytics techniques can be used to perform risk assessment  procedures or further audit procedures if they can provide sufficient audit evidence that a risk of material misstatement has been addressed.  The following factors are to be considered:  <\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>the purpose of the process<\/strong> is whether data analytics is directly  responsive to the identified risk of material misstatement, and<\/li><li><strong>the level of precision in the procedure<\/strong>, for example, whether the  expectation is sufficiently precise to locate a misstatement.<\/li><\/ul>\n\n\n\n<p>Auditors\n can focus on outliers and exceptions to identify the riskiest areas of \nthe audit by employing data analytics. Data analytics techniques can \nanalyse entire populations of transactions.<\/p>\n\n\n\n<h1 class=\"wp-block-heading\"><strong>Identification of exceptions<\/strong><\/h1>\n\n\n\n<p>The  use of data analytics in performing substantive procedures may lead to  the identification of a vast number of exceptions. The auditor can group  and filter the exceptions into sub-populations, where applicable.  Further analysis and additional procedures must be performed to  determine if these exceptions are: <\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>false positives<\/li><li>possible misstatements that are inconsequential for which no further investigation is required, and<\/li><li>possible misstatements that are not inconsequential for which further investigation is needed.<\/li><\/ul>\n\n\n\n<p>The ISCA\u2019s Exposure Draft of the AGS on Data Analytics in a Financial  Statement Audit is expected to be issued for public consultation soon. <\/p>\n\n\n\n<p>Source: <em>ISCA Journal<\/em>, 9 October 2020, accessed 14 October 2020.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>In an article under FOCUS, Lim Ju May, Terence Lam and Wang Zhumei explained how data analytics can be innovative and effective during audits even with complex businesses and large volume of transactions. The article states that data analytics is defined as the science and art of: discovering and analysing patterns, identifying deviations and inconsistencies, [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"nf_dc_page":"","_et_pb_use_builder":"off","_et_pb_old_content":"","_et_gb_content_width":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[13,6],"tags":[],"class_list":["post-1571","post","type-post","status-publish","format-standard","hentry","category-auditing","category-techupdates"],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"http:\/\/ehluar.com\/main\/wp-json\/wp\/v2\/posts\/1571","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/ehluar.com\/main\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/ehluar.com\/main\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/ehluar.com\/main\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/ehluar.com\/main\/wp-json\/wp\/v2\/comments?post=1571"}],"version-history":[{"count":1,"href":"http:\/\/ehluar.com\/main\/wp-json\/wp\/v2\/posts\/1571\/revisions"}],"predecessor-version":[{"id":1572,"href":"http:\/\/ehluar.com\/main\/wp-json\/wp\/v2\/posts\/1571\/revisions\/1572"}],"wp:attachment":[{"href":"http:\/\/ehluar.com\/main\/wp-json\/wp\/v2\/media?parent=1571"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/ehluar.com\/main\/wp-json\/wp\/v2\/categories?post=1571"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/ehluar.com\/main\/wp-json\/wp\/v2\/tags?post=1571"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}