Friday 29 Mar 2024
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This article first appeared in The Edge Malaysia Weekly, on November 2 - November 8, 2015.

 

BIG data is set to revolutionise the audit profession, and auditors will have to embrace and use these analytics to their advantage to remain effective in the digital economy.

This was the message that emerged from a panel discussion on “Auditing in the Big Data Ecosystem: Preparing Auditors for the next level” at the Malaysia Institute of Accountants (MIA) conference held last week in Kuala Lumpur.

According to a recent study by International Business Machines (IBM), 60% of CEOs have more data they can use, resulting in information overload.

Panellist Tim Phillipps, Deloitte Southeast Asia partner, says big data would not matter much if auditors do not grasp the correct way to use it.

“Data is just data; it's what you do with it that counts, not the size of it. I would just drop the term ‘big’. It's just about the data and the way in which you make it part of your business.

“We've got to be clear about what we want to do. We've got to ask, with the large amount of data available, what are they? What can we do with it and what do we want (from the data)?” says Phillipps.

Among other findings of the study were that one in three leaders make decisions based on information that is not trusted; one in two leaders do not have the information they need; and 80% of all available data are uncertain.

The head of the Audit Oversight Board at Securities Commission Malaysia, Lim Fen Nee, agrees with Phillipps, as the use of data has a big influence on the decision-making process.

“The usage of the data itself obviously facilitates the decision-making as a whole, whether for auditors or businesses,” says Lim.

BDO Malaysia executive director, advisory, Sanjay Sindhu, opines that adopting big data analytics will help to improve audit quality. “Dealing with it, adopting it and using it to do the audits is obviously going to help to improve audit quality,” he says.

Panel moderator Dr Nurmazilah Datuk Mazlan, the deputy CEO of MIA, highlighted the differences in the analytic tools used by auditors then and now.

“Big data is changing the way auditors work. Probably you won't have the tools you had before. Now you have to use the computer to handle the issue of big data; there's a lot of software out there in terms of analytics,” says Nurmazilah.

Sanjay, who has been in the industry for more than 15 years, says the tools have not changed much over the years.

“I think the evolution that needs to happen is inside our heads. What data are we trying to capture? Why are we collecting them? How do we want to analyse them? And how do we turn that into proper business decisions and into better quality audit evidence?” says Sanjay.

Phillipps believes that for those who are not ready to embrace big data, meeting the required standards could become an issue. “As standards change — and with international expectations these standards must be met — it won't matter how big or small you are. You need to follow the practices that clients, stakeholders and the regulators are looking for,” says Phillipps.

The less obvious risk for auditors, he says, is the concept of disruption when auditors do not adopt big data analytics because their nearest competitors will.

According to Lim, no matter what tools auditors use, it is important for them to make sure they can provide assurance. “What is more important to a regulator, for whatever data analytics that you use, it must be able to provide assurance and confidence,” she says.

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