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Technological developments have changed how auditors and clients perform work and support business decisions. As clients’ expectations continue to evolve, the auditors’ use of technology will need to expand to keep pace.

Audit Data Analytics: How Technology is Changing Audit Approach

By Bill Kubistal, CPA, CISA

Audit Data Analytics (ADA), as defined in the American Institute of Certified Public Accountants’ (AICPA) Guide to Audit Data Analytics, is “the science and art of discovering and analyzing patterns, identifying anomalies, and extracting other useful information in data underlying or related to the subject matter of an audit through analysis, modeling, and visualization for the purpose of planning or performing the audit.”(1) Technological developments have changed how auditors and clients perform work and support business decisions. As clients’ expectations continue to evolve, the auditors’ use of technology will need to expand to keep pace.

Industry Use of Analytics
In recent years, the profession has been moving away from the traditional audit approach of utilizing brute force sampling to arrive at an opinion and towards a smarter, more efficient risk-based approach. This mindset shift can also be seen within the standard-setting bodies recently issued standards. For example, Sections A59 and A60 of the Application and Other Explanatory Materials section of the AICPA Statement on Auditing Standards (SAS) No. 142, Audit Evidence, state, “Audit data analytics are techniques that the auditor may use to perform risk assessment procedures or substantive procedures. Auditors can manage larger data sets and discover nuanced relationships through the use of technology. Audit data analytics may enable auditors to identify areas that might represent specific risks relevant to the audit, including the existence of unusual transactions and events, and amounts, ratios, and trends that warrant investigation.”

Benefits of ADAs in Engagements
Incorporating ADAs has the potential to increase audit quality and improve audit efficiency while providing a greater insight towards the client’s operation. Leveraging technology allows auditors to perform risk assessments more effectively, design audit procedures that are more appropriate for each specific client, and gain insights into the data to recognize anomalies that may have otherwise gone undetected.(2)

Once technology has analyzed the data and highlighted any anomalies, then the auditor can utilize this information to tailor their audit approach. Increased visibility into the entire data set of the client will allow the auditor to separate the audit cycles into distinct tranches of risk and focus the majority of their time and effort on those cycles that fall in the tranche with the highest level of risk. This approach will benefit both the auditors and the clients due to the increased precision of the overall audit.


In the midst of the current digital revolution, the audit process has been enabled to provide more operational and risk insights to both the auditor and management.(3) Commercial audit committees are requiring these skill sets. Advanced technologies, such as data analytics, artificial intelligence, machine learning, and robotic process automation, allow auditors to facilitate data-driven audits, reducing hours spent on manual testing and increasing time available to consider and deliver meaningful information to the client.

While the benefits of implementing technology in an audit practice are vast, there are also concerns that will need to be addressed and issues that may need to be resolved before such technology is adopted.

Concerns Raised
ADA’s require reliable data to be effective. Auditors will need to understand and assess their client’s data. Another concern is the perception of audit quality in a technology-assisted audit. A study supported by the AICPA’s Assurance Research Advisory Group conducted a hypothetical external engagement review where the audit team had either employed a data- and analytics-driven audit approach or used a traditional audit approach. The study found that “experienced auditors acting in the role of external reviewers judge data and analytics approaches to be lower in quality than traditional approaches, even though the level of assurance was constant.” Additionally, researchers noted that external reviewers were “relying on the ‘effort heuristic,’ which is the tendency to judge quality based on perceived effort.”(4) Collectively, accountants will incorporate emerging technology into the profession’s quality control framework.

Impact on Implementation of Standards
As the industry continues to evolve, the use of new technologies will be essential for effective and efficient implementation of new standards, such as SAS No. 145, Understanding the Entity and its Environment and Assessing the Risks of Material Misstatement, which is effective for periods beginning on or after December 15, 2023. This SAS will require auditors to obtain a deeper understanding of internal controls to clearly articulate the auditor’s evaluation of the controls design. Incorporating ADAs to complete the previously time-consuming initial assessment of the data will allow auditors to focus on the value-add tasks of evaluation of results and apply auditor judgement to ensure that the procedures performed will properly mitigate the identified risks.

Technology continues to evolve at an ever-quickening pace and the accounting profession will need to adapt to stay relevant. Kearney has deployed ADAs in both audit and attest engagements. Kearney’s use of ADAs resulted in a more insightful risk assessment and a focused and efficient sample selection. By weighing the benefits of using ADAs and considering the accompanying concerns, auditors can make a well-informed decision about the audit approach they will use in the future. Leaders within the industry will continue to focus on developing a digital mindset and implementing new technologies into their audit approach, ultimately resulting in their ability to deliver superior service to their clients.

(1) Byrnes, Paul; Criste, Tom; Stewart, Trevor; and Vasarhelyi, Miklos. “Reimagining Auditing in a Wired World.” as defined in the AICPA’s Guide to Audit Data Analytics.
(2) Tysiac, Ken. “Embracing Technology in the Audit.” as published in the Journal of Accountancy on February 1, 2022.
(3) Butaka, Gopikrishna. “The Evolution of Audit in the Wake of the Pandemic.” as published in the Information Systems Audit and Control Association (ISACA) Journal on February 15, 2022.
(4) Murphy, Maria L. “Perceptions about Analytics-Aided Audit Quality.” as published in the Journal of Accountancy on April 22, 2020