What is a Data-driven Audit?

Technology

The James Webb Space Telescope has captured the clearest images yet of galaxies hundreds of millions of light-years away, illuminating starbursts, shock waves, and cosmic dust for the world to see. How? Rather than sending astronauts into space, it changed the game, inspiring innovators across fields.

The relevance to the audit industry: We, too, face complex challenges that have traditionally relied on manual human-speed activities that can consume valuable time and may not fully capture all risks to an organization. So, what’s our gamechanger?

Our answer: Bold and strategic investments fine-tune how we deliver a data-driven audit. We’re focused on defining what a data-driven audit is and, in the future, we’ll focus on other elements of how we’re bringing that to life.

What we’re doing: To us, delivering a data-driven audit means efficiently extracting and analyzing transaction-level data to fine-tune risk assessments and glean new audit insights to corroborate expectations, reveal outliers, streamline audit procedures, and more. Importantly, all this work is delivered via KPMG Clara – our global smart audit platform that brings all our work together.

This emphasis on D&A has accelerated investments in new ways to extract data from a broad set of IT environments. No matter the business IT environment or where our clients are on their technology journey, we can work with them to efficiently extract more data.

How this is playing out in audits: To deliver against this strategy, last year we deployed a wide array of advanced D&A solutions across our portfolio: data extraction, transformation, analysis, visualization, bots, automated routines, document investigation solutions, and more. In fact, the adoption of extraction and transformation solutions more than tripled, while the use of visualization technology nearly doubled in FY22. Let’s go a bit deeper:

1. D&A analysis is only as powerful as the validity and volume of data one can ingest. Today, nearly 2,000 KPMG auditors have specialized capabilities to drive the extraction and transformation of data from a broad range of IT environments. More than 3,000 routines have been developed to preprocess data for deeper risk assessments. Looking across our portfolio of technologies, teams have executed D&A as well as automation solutions more than 4 million times last year.
2. Continuing our KPMG Clara journey. As part of our KPMG Clara journey, we recently enhanced our planning, risk assessment, and journal entry analysis toolset by strategically expanding the usage of KPMG Clara Advanced Capabilities. Today, more than 600 audit engagements, including more than half of all public accounts, are benefitting from this enhanced capability.
3. Going deeper with transaction scoring, including new revenue, operating expense, and industry-specific routines. We’ve developed and deployed 60+ automated industry routines, along with cross-industry routines to analyze expenses and revenues. With these capabilities, we can focus on the risks that matter, rather than selecting transactions randomly using traditional sampling techniques.
4. Preparing our people for a data-driven future. We believe the future of audit will be considerably more data-driven. As our Talent and Culture leader - Audit Becky Sproul highlighted, in FY22, our Audit partners and professionals spent 120,000+ hours of training on data and technology, more than double our FY21 hours. This focus occurs within a learning and development strategy aligned to quality, relevance, and skills for the future of audit.

As KPMG Vice Chair – Audit Scott Flynn wrote, “No matter what is going on with your business, your audit must consistently deliver the efficiencies and insights you need, while maintaining the highest quality standards.” A data-driven audit delivers against that promise by efficiently and effectively extracting data, using technology to analyze that data consistently, including at the transaction-level, and then focusing our testing on the areas of highest risk.

Coming soon: D&A is a critical component of our technology focus, and it has multiple facets. Now that we’ve established what a data-driven audit is, in a future article we’ll discuss how we use automation to deliver quality and efficiency. I look forward to sharing more on our automation journey soon.