Cangemi Perspectives: What is most important about using analytics?
Michael P. Cangemi a former C level executive, is a senior fellow at Rutgers and an advisory Board Member of the Rutgers Continuous Auditing and Reporting Lab. The opinions expressed in this article are solely those of the author.
My first involvement with data analytics, continuous auditing (CA) and continuous monitoring (CM) was at EY in the 1970s. In the 1980s as National Director of IT Audit at BDO, I lead the effort to put analytics technology in the hands of our professional staff, giving them access to the early versions of IDEA. We assumed, as technology proliferated, we would see accelerated growth of CA.
The profession has not evolved as quickly as we expected.
As noted in my prior blog and in the 2018 Audit Team Trends Report (it is noteworthy and you should read it for yourself!), auditors are using data analytics software in more of an ad hoc way (43%) and for manual testing (28%) rather than CA/CM processes (29%).
As a former CAE who went into senior management serving as a CIO, CFO, CEO, Board Member and Audit Committee chair, I didn’t find this surprising. After my BDO roll out, my next position was CFO and we used IDEA and data analytics on an ad hoc basis!
When I recently began to research and promote CA, CM and data analytics, I thought a continuous process was critically important and at an inflection point. However, I learned that while continuous processes are growing, the growth is slower than we anticipated. This is consistent with the results of the survey in the trends report.
From my research I also learned that making an analytics process continuous is very difficult, unless you build it in as part of the initial development. Therefore, as the survey supports, when auditors assist with innovative new systems, there is a steady expansion of CA and CM.
These processes are extremely valuable, and with development of new systems and new trends like IoT (the Internet of Things) they are sure to become a bigger part of improving GRC and business processes.
However, whether it is ad hoc or continuous is not the most critical aspect of the use and automation of analytics. You will read a lot about the importance of using data analytics to gain insights from the data. My view is that the critical benefit of using data analysis is that you learn the most critically important talent: understanding the business. Audit’s true value is unlocked when you combine their understanding of control objectives with business acumen and insights from using data analytics.
In the previously mentioned trends report, my perspective is supported by Scott Jones, President & CEO, Key Performance Initiatives Inc. He says, “The purpose of doing data analytics is to get insight into the process. People with process knowledge are more likely to take some pattern they see in the numbers and relate it to a behavior they’ve seen in the business.”
So how important is data analytics in helping internal audit bring value to the business? According to this Audit Trends 2018 Survey report, more than 90% believe using data analysis demonstrates internal audit’s value (56% said that it is Very Important, while 35% indicated it is Important).
I think the most important aspect about using data analytics is improving your function’s image to the C-suite by sharing the data insights and evolving business acumen you have achieved. That is how they will measure their return on the investment!
About Michael P. Cangemi
Michael P. Cangemi is a senior fellow at Rutgers University and serves on the Rutgers Continuous Auditing and Reporting Lab Advisory Board. A former CFO and CEO, a prolific writer, active speaker and senior advisor to various companies, Mr. Cangemi now focuses on providing continuous auditing, continuous monitoring and analytics intelligence for GRC, Finance and Business Process Improvements. He also serves on FEI’s Committee on Finance & Technology (CFIT) and their GRC Sub Committee; the EDPACS Editorial Advisory Board; and the ISACA Governance Committee.