Since the GFC there has been a major push by governments, industry bodies and enterprises to improve audit quality and reduce costs. Tougher government regulations, increased oversight, and bigger penalties have only added to these pressures.
It should therefore come as no surprise to find in recent years there has been a significant increase in the level of investment being directed at the development of “smart” computer assisted auditing technologies (CAATs); many including advanced data-analytics.
So, what will this new generation of smart CAAT’s look like? And more importantly, how will they address the current challenges facing the auditing process? Here a short list of some of the new CAAT features and benefits to look out for;
Reliable Risk Data –one the biggest criticisms levelled at auditing has been its capacity to provide reliable operational risk data. The next breed of CAATs will address this weakness by transforming an enterprise’s current auditing process into a powerful operational risk assurance system. This remarkable transformation will be made possible by advanced analytics that will continuously evaluate the risk control performance of each process and third-party.
Integrated Risk Reporting – one of the key benefits of being able to use audits to reliably measure process and third-party risks enterprise-wide, is that board-members, senior-management and process-owners can focus their limited improvement resources on those areas that will generate maximum benefit i.e. risk reduction.
Effective Risk Control – once you have the means to reliable assess and report operational risk enterprise-wide, you have the means to control it. Accordingly, the next generation of CAATs will use their smart data-analytics to determine when risk levels have exceeded acceptable limits, or risk appetite, and what actions are needed to mitigate and improve risk control performance. This functionality is likely to be supported by real-time alerts and user-assigned protocols.
Continuous Audit Optimisation – these new CAATs are also likely to include a range of new efficiency features; including calculating the optimum frequency and sample-size for each process and third-party audit. This calculation will be risk-based. Meaning, processes and third-parties with a “high” risk rating will be audited more rigorously than those with a “low” risk rating. This dynamic, risk-based approach to auditing will significantly improve audit efficiency, and effectiveness, by focusing an enterprise’s limited auditing resources on its areas of highest risk exposure.
Continuous Risk Improvement – an indirect benefit of being able to used advanced CAATs to reliably assess, report and control process and third-party risks is that the responsible parties can be made more responsible for their risk control performance. This will be achieved through new financial incentives and penalties. There is nothing quite like money to incentivise continuous improvement.
These are just a sample of some of the auditing improvements to be delivered by the next generation of CAATs. Features and benefits that are likely to trigger a major paradigm shift in how the audit is perceived and more specifically, how advanced data-analytics can help enterprises more effectively and efficiently monitor, control and improve their process and third-party risks.
For more information on smart risk-based CAATs and how your enterprise can start taking advantage of these new technologies visit us at http://www.compliance-master.com