4.2. Interviewing results on the advantages, opportunities and challenges
4.2.2. The opportunities and challenges
However, auditors also pointed out that they also face some challenges when applying for DA. Largely because of the gap in the auditor's expertise when it comes to using big data, the company must seek out analysts to train the auditors on the DA techniques used appropriately. There are increased costs related to having the firm‟s IT people involved. There is also increased time spent in learning to apply the tools effectively in the context of this audit. More hours were spent in year one to set up the use of ADAs for the engagement. There have been changes in the mix of the work (e.g., senior staff or manager involvement in running reports).
The team is expected to be more efficient in year two, the team composition will be the same as the prior year. Costs have increased because more senior staff are now being used for the audit than was the case a few years ago. However, audit fee issues have never come up with this client.
At the individual level, the audit team leaders (partners and managers) perceive that the firms give incentives or exert pressure to use ADA instead of traditional audit tools. Audit client pressure may also influence their decision around the adoption of ADA although all heads of professional practice did not agree with such pressure.
It can be difficult to determine when and where DA can be used in audits. In addition, stakeholders indicated that consideration should be given to the nature of the audit evidence that is gathered by using DA tools. He also opined that although DA could provide some pervasive audit evidence, it should not be a substitute for other methods that are currently used in gathering audit evidence (such as audit confirmation and inspection of documentation). In this regard, audit practitioners need further clarity on what the audit procedures of DA may be used for, and
whether it is used as an exploratory tool or as a confirmatory tool related to audit evidence.
A challenge for more ADA use seems to be how to cost-efficiently transform the output from ADA to sufficient and appropriate audit evidence. Research can contribute to better understand which factors inhibit this transformation to assist auditors to better apply ADA, for example along the lines suggested by No et al.
(2019). Uncertainty about supervisory bodies‟ inspection behavior inhibits auditors‟
use of ADA. A better understanding on how inspection risk affects auditors‟ ADA use (or none-use) is of importance.
Multi-location application of ADAs is difficult because different locations may do things differently; this makes it challenging to run standardized routines to acquire data. Obtaining data in a format usable for audit purposes has been a challenge, particularly when client system changes have resulted in the updated system providing less detail than was previously available. It is important to discuss data acquisition issues up front with the client. The engagement team had proposed using the ERP extract functions to obtain data for audit purposes. However, the client did not allow this. Their view was that this would entail management having to engage ERP personnel with specialized expertise. This would be expensive both in terms of cost and time. Obtaining access to individual sub-ledgers did not present any issues. However, the volume of data required for the general ledger analysis was very large. The data had to be obtained quarterly, which took considerable time. If an attempt had been made to provide the auditor with the data all at once, the company‟s system would have crashed in the process.
It is difficult to work with data that is still being modified by the client. The examiner must keep track of the adjustments made to the data used for the analysis.
This could be a bigger problem for some audits. For example, because smaller customers can sometimes make more adjustments, using preliminary data may not be practical. It is unproductive to undertake a significant amount of work and then find that the data does not reconcile with the records used to prepare the financial
statements. On the plus side, the lack of disparate input sources for this client helped minimize data collection issues.
CONCLUSION OF CHAPTER 4
Coming to company A and company B, Chapter 4 has shown the audit processes and analytical procedures when auditing financial statements at AASC Auditing Firm. The benefits when auditors begin to include audit analysis in the audit of financial statements, and at the same time point out the difficulties and challenges that auditors face. Besides, Chapter 4 also answered two research questions in Chapter 1.