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Can you make the most of data without specialist data analytics tools? Do all auditors need coding skills? This article considers some possible answers – and what is behind them.

The audit profession has always explored available technologies and then adopted those with the capacity to sustain or elevate the quality of financial statement audit. Today, there is more such tech than ever before, but this can make it difficult to determine which can deliver most in terms of quality (and efficiency), what expertise this requires from auditors and where they should focus any upskilling efforts.

“Technology upskilling in the audit profession is a huge topic right now, but it’s important to remember that first and foremost we’re auditors,” says Ian Pay, Head of Data Analytics and Tech, ICAEW. In practice, the tech you need to know about will largely be determined by your role as an auditor, decisions that have been made by your (past and present) firm – and also by audited entities. But you still need to keep a ‘watching brief’.

The art of the possible

“As auditors, we need to be curious about the technology that’s out there,” says Pay. Auditors increasingly use tech tools to explore data, understand the audited entity, find new sources of audit evidence and seek insights to support their professional judgements. So, data analysis is an area where many are focusing on upskilling. But the need for this and the scope of it will vary.

An auditor who is involved in tech-related strategy and purchasing decisions will have a different perspective to an auditor who is not. The firm’s size and structure will also have an influence. But all auditors can benefit from some knowledge of technologies and tools that can enable and enhance methods of accessing, analysing and gaining insights from information and data that can be used in audits.

It is an area where there are lots of exciting developments, but it is important to remember that working with data is not the same as being a data analyst. “We’re auditors, not data analysts,” says Pay. “This is not to say that auditors can’t develop skills in analysing data. Indeed, this should be actively supported and encouraged. But never at the expense of the knowledge and skill that’s needed to be an effective auditor.”

So, if auditors want to develop tech skills that will enhance their analysis of data, what should they focus on? “Let’s make sure we can do the fundamentals well and use the tools we have to the best of our abilities,” says Pay. This might mean focusing on the specialist audit data analytics (ADA) tool your firm has opted for; it might mean focusing on a spreadsheet application such as Microsoft Excel or Google Sheets.

Audit data analytics

Over recent years, the adoption of specialist ADA tools has spread. This has been reflected in Audit & Beyond articles, related resources for ICAEW members and students, and the decision to build ADA software into the ACA syllabus and some professional and advanced level exams. ICAEW also offers a certificate in data analytics, in partnership with Kaplan.

The certificate offers two separate streams, which do not overlap, and auditors can choose to follow one or both. The Management Pathway covers the business benefits of applying data analytics, how to build an effective data analytics function, and can give auditors the skills to interpret and challenge data analytics outputs and present them with maximum impact.

The Analyst Pathway guides you through the data analytics process and gives you the knowledge and practical skills to be able to harness and make sense of data, to understand what it means and to communicate this effectively. This pathway includes basic Python programming – using free/open-source tools – and may appeal to auditors who want or need to develop practical, hands-on data analytics skills.

To code or not to code?

“Tools like Python are incredibly powerful and – make no mistake – they can open up a lot of very advanced capabilities,” says Pay, but not every auditor needs such skills. This is determined, in part, by variations in firms’ approaches to data analysis in the context and in support of financial statement audits, whether this demands people with Python skills and whether those people are auditors.

Some firms have specialist non-technical data analysis teams that use Python (or R or another data science-orientated language) to support audit teams. Some firms prefer these data analysis specialists to have an audit background; some do not. Some firms are equipping their audit team members with basic skills that enable them to use Python, but plenty of firms opt for tools with a more familiar feel.

This could be a tool that comes from the same provider as other software and services being used in the practice. It could be a tool such as Microsoft’s Power BI, particularly if a firm has auditors or others who are experienced and expert at using this to work with data. If a firm is already paying for Microsoft Office, that familiar option may be Excel – although other spreadsheets are, of course, available.

The spreadsheet

Spreadsheets remain a core part of the accounting and auditing world. “This is unlikely to change any time soon, so being proficient at and understanding the full functionality of the spreadsheet is imperative in the profession. In doing so, we may find these applications offer a lot that’s likely to meet our data analysis needs,” says Pay. For some firms, spreadsheets are simply the most affordable and accessible option.

Some faculty members have requested more information on how to make better use of Excel in audit, and future Audit & Beyond articles will address this, with practical tips on, for example, useful Excel functions and simple Excel analytics. ICAEW’s Excel Community offers another route to support resources. Membership is open to all and non-ICAEW members are welcome.

Excel Community members have access to a wealth of support and guidance. Benefits include:

The community’s guide on how to review a spreadsheet, its ‘Financial Modelling Code’ and the 19-part series that works through this, are just some of the resources that auditors may find interesting and helpful.

When it comes to technology upskilling to enhance an auditor’s access to, analysis of and insights from information and data that can be used in audits, there are lots of ways you could potentially go and lots of factors to consider. So, keep your eyes on the prize. As Pay observes: “Technology – and the skills that we learn – should be used to support us in the delivery of high-quality work, not to distract us.”

Further resources

For members of the Audit and Assurance Faculty, this part of ICAEW’s website is generally a good place to look for audit-specific technology-related resources, as are editions of Audit & Beyond.

Other parts of the ICAEW website also provide tech-related resources that auditors will find useful.

Resources that used to be restricted to members of the Tech faculty are now available to all ICAEW members and ACA students, offering access to areas such as its hub on ‘Risks and assurance of emerging technologies’ and the archive of past editions of Chartech magazine.

ICAEW Insights articles during 2022 have considered cryptocurrencies, digital skills for auditors and the possibilities and limitations of machine learning. Topics during 2021 ranged from fighting fraud with artificial intelligence (AI) to how audit firms are becoming more ambitious in their use of data.

Regulators and standard setters also offer resources. The International Auditing and Assurance Standards Board has, for example, published three ‘digital technology market scans’: an AI primer, a market scan exploring data standardisation platforms and a third introducing application programming interfaces (APIs) and exploring how using them to access external data sources can enrich analysis.