What is the importance of analytics in auditing

Auditing is a tedious task that is conducted by every firm to ascertain their financial position as well the accuracy of the accounting statements. The auditing process was adopted by the firms a long time ago since it has seen various advancements such as development in its methods and processes as well as simplification of complex tasks. The very recent advancement and change that made auditing more simplified is the usage of data analytics in the auditing process.
Also read: Importance of Data Analytics for Internal Audit

What is meant by data analytics?

In the present era, where the firms use auditing and accounting software to perform the respected tasks in an efficient manner results in the generation of a bulk amount of data that can be collected and used by the firms to study and evaluate their actual performance with maximum accuracy.
Data analytics technology in simple words means an integrated system of business, technology, information, and statistics. With the help of data analytics, the firm can evaluate the actual trend of the firm and its current position in the competitive market.

What are the different types of data analytics?

The application of data analytics in the auditing field is increasing day by day due to its outstanding capabilities of filtering a bulk amount of data and converting it into a simplified form to enhance the internal auditing and external auditing process. The business firm can use different types of data analytics which are listed below:

Descriptive analytics

This type of data analytics provides the answer to the question 'what happened, it gives information about the past events of a business out of the data grabbed out of different sources. It helps to know what has gone wrong. This type of data analytics also enables to set of desired goals, collection of data including the processing of such data to ensure a better future.

Diagnostic analytics

Diagnostic analytics provides an answer to the question 'why did such an event happen', with the help of past data and the business performance. This enables the firms to know the source of any problem and the reasons for the occurrence of such problems.

Predictive analytics

It provides the answer to the question 'what is likely to happen in the future, it uses various combinations of analytics models, software, and technologies to forecast the future of the business and provide the business management with a clear picture of the trends of business in future.

Prescriptive analytics

This type of data analytics is considered one of the complex types of analytics. This analytics helps the firms to take proper decisions to face the problems which may arise in the future. This analytics requires a complex and sophisticated analytics tool.
The above explained are the main four types of data analytics that a firm can use as per their requirements. Combining all the analytics is considered the best course to ensure efficient use of data analytics.

How can data analytics play an important role in auditing?

Data analytics becomes helpful for auditing in the following ways:

High level of accuracy

Data analytics collects information from all the technological processes of the business and ensures its accuracy and it always keeps the data in the filtered form. This helps the firm conduct the audit more efficiently and precisely.

Transparency of data

The data collected by the data analytics cannot be tampered with or altered which helps to ensure the transparency of the firm's performance as well as provide the maximum level of accurate information to the auditors.

Increases the confidence of stakeholders

Due to the transparency and the accuracy provided by the data analytics, it increases the level of confidence and trust in the minds of investors and other stakeholders. The auditors can also rely on the data without any hesitation provided by the analytics.

Provides better risk analysis

With the help of data analytics technology, the firm can gather data from all the departments and evaluate them through which they can see the red flags relating to any risks in advance. The data acquired will help the auditors detect any anomalies in the firm's work.

Ensuring secure future

With the accurate data acquired from data analytics, the firm can evaluate every aspect of the future and this enables the firm to gear up with all those policies and strategies which it may require in the future for effective working.
Also read: How do Internal Auditors add value to the business

How can CDA help?

If you require any auditing, accounting, or financial restructuring services in Dubai then you must have a look into the various accounting and bookkeeping services rendered by CDA. It is known for its customer-tailored approach which ensures maximum client satisfaction. CDA, with its team of experts, is always ready to provide solutions to its client wherever they face any challenges. For detailed inquiry feel free to contact us.