UK audit firms can do more to support roll-out of leading-edge data analytic techniques
30 January 2017
UK audit firms are at the forefront of developing and using data analytic techniques with the potential to improve audit quality. A more structured approach to their deployment could accelerate their effective use, according to findings from a review carried out by the Financial Reporting Council (FRC).
The Use of Data Analytics in the Audit of Financial Statements
(PDF) thematic review identified that the use of data analytic techniques is not yet widespread and gives examples of good practice identified during the course of FRC audit inspections. Examples include:
- enabling audit staff to build experience and confidence in using a specific audit data analytics tool through a structured roll-out programme.
- using data analytics for the first time at an interim audit date to improve the prospect of obtaining robust audit evidence at the financial year end, particularly in a first year audit.
- improving the effectiveness and efficiency of the extraction of entity data into audit data analytics tools by using dedicated specialist staff and/or dedicated software.
- using data analytic techniques to improve oversight and consistency of multiple auditors contributing to group audit audits where organisations have global accounting systems.
Melanie McLaren, Executive Director for Audit and Actuarial Regulation, said,
“The FRC promotes continuous improvement in UK audit. Competition on grounds of quality and innovation has increased since the introduction of audit tendering. UK audit firms are at the forefront globally of developing data analytic techniques with the potential to improve audit quality. In reporting on our thematic review of their use in practice, the FRC hopes to accelerate effective usage for the ultimate benefit of those who rely on UK audit.”
Notes to editors:
1.The Financial Reporting Council (FRC) is the UK’s independent regulator responsible for promoting high quality corporate governance and reporting to foster investment. The FRC sets the UK Corporate Governance and Stewardship Codes and UK standards for accounting and actuarial work; monitors and takes action to promote the quality of corporate reporting; and operates independent enforcement arrangements for accountants and actuaries. As the Competent Authority for audit in the UK the FRC sets auditing and ethical standards and monitors and enforces audit quality.
2.The first Developments in Audit
report was produced in July 2016. It provides background on the continuous improvements, and drivers of confidence in audit. The report can be found here