When Ed Wilkins, CPA, talks to audit committees about adding data analytics to the audit process, he explains to them that it usually takes three years for investment in a complex audit analytic to pay for itself, according to a recent article in the Journal of Accountancy.
Audit analytics give practitioners the ability to examine an entire dataset rather than just a sample, improving the quality of an audit and unlocking additional insights by analyzing the data.
He tells audit committees that in the first year of implementing a tailored analytic designed specifically for their company, it takes extra time for the company to locate the dataset and more time for the auditor to get the data reconciled and formatted (typically referred to as data wrangling) and prepared to go through the analytics process. This adds hours to the audit in the first year.
“The second year we hope to break even in hours,” Wilkins told the Journal, “because now we’ve got the data-wrangling piece identified, the client has it down and documented how to get us that data, so it becomes more efficient on their part, we know the mapping better. But there are still going to be a few tweaks.”
By the third year, the process typically is established to the extent that the full-population analysis consumes less time than sampling. And the added benefit comes with the identification of outliers or notable items.