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Biz Intelligence Systems: A Key Driver For Future Audits

Published on Tue, Dec 23,2014 | 22:02, Updated at Tue, Dec 23 at 22:02Source : Moneycontrol.com 

By: Sunil  Kothari - Partner  &  Nikhil Kenjale - Manager, Deloitte Haskins & Sells

Prediction, imagination and ultimately taking decisions is driven by analyzing and interpreting the continuous flow of varied inputs from the scattered sources. It can be a personal communication, official e-mail, a messenger chat, internet, newspaper, television and so on. In earlier days, the effectiveness of decisions was largely dependent on the person i.e. his knowledge, updation, experience etc. These attributes are still required and are inevitable in the decision making process. However, with the world going digital and greater access to knowledge and data bases, availability of “Relevant Data” has become the key element of the decision making process.

Consider extracting last 10 years’ sales data, analyzing and summarizing it geography-wise without computers. In old days, nobody would have thought the need and possibility of doing such analysis. But in the today’s post internet era of cloud, we are heavily dependent on the technology and the dependency is going to increase further. The natural outcome of this dependence is the generation of enormous data both active as well as passive.  The key question is, should we ignore this data or use this data to enable us to carry out businesses more meaningfully / effectively?

In short, one has to identify information requirements considering their business objectives and then put systems in place to make maximum use of the data captured by various systems. While it is true that we cannot eliminate the factor of emotional intelligence from the decision making process, the decision maker has to have all relevant information in order to remain effective.

Let us take a closer look at what “Business Intelligence” (BI) systems means. A quick search on WIKIPEDIA reveals a very simple definition of BI i.e. “Business intelligence is the set of techniques and tools for the transformation of raw data into meaningful and useful information for business analysis purposes.”

 

 

 

 

 

 

 

 

 

 

The above is a generic definition of BI and it has to be in that way as BI system for a company would be very unique and may involve combination of many aspects like giving a denovo look to information requirements, software development, system integration etc. across business units / geographies.

BI technologies essentially provide past, present and possible future views of the information already captured. The deployment of BI systems in a company may take many forms and names like reporting tools, online analytical processing (OLAP), analytics, data mining, process mining and so on. Companies with effective BI systems have started getting the cutting edge over their competitors. According to one of the latest surveys, globally Cloud-based Business Intelligence (BI) is projected to grow from $ 0.75B in 2013 to $2.94B in 2018, attaining a CAGR of 31%.

How it affects auditors? It is very much clear that BI systems ultimately help companies in reducing the variability in the planned cash flows which is caused by many factors internal and external to the organization. As the world is moving towards “Proactive” controls with the help of technology from the traditional “Reactive” or “Detective” controls, it is inevitable for auditors to get ready for auditing the systems that deploy these “Proactive” controls.

 

 

 

 

 

 

 

 

 

The future audits would largely cover audit of controls and the scope of the substantive procedures would get limited to verification of key business / legal documents and other minimum audit procedures.

Data analytics – one of the main aspects of BI systems, has remained the hot topic for the auditors’ fraternity but in reality the use of analytical tools have been minimal and there are many things which auditors would have to learn. With clients increasing their reliance on BI systems, auditors should understand and consider below mentioned aspects in their audits:

 

Understanding business: There are many companies which have started using hourly / daily dashboards as an integral part of their day-to-day operations. E.g.  Many Finance Shared Service Centers (FSSCs) use electronic dashboards to monitor the volume of transactions processed in a day. Understanding of these systems is of utmost importance for auditors in order to understand the business environment.

Understanding controls: There would not be change in the basics of understanding any business process, however, there would be more electronic/digital processes that an auditor will have to understand. E.g. In respect of control over raw material price changes, one of the automobile manufacturer has developed a system which sends an e-mail to head of procurement and key management personnel when any rate change in effected in the ERP system. So understanding and testing of such controls would be relevant compared to traditional manual approval type controls.

Analyzing financial statements: In case of listed companies, lot of data is already available externally and internally, where auditors can see the consistencies between various reporting by the management e.g. comparing financial statements against presentation to analysts, reporting to stock exchanges, MIS / Dashboards used by the management etc.

Future audits would be much complex but at the same they will be interesting too. Perhaps an auditor may be able to complete the audit planning process by sitting in his own office and by accessing BI systems for gathering many business inputs needed for his planning. At least a directional effort to understand BI systems and factoring them in the audit process will itself be a big step towards auditing digitally.

 
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