A helping hand: using software to improve analytical procedures in audits & reviews.

• Author: Hamilton, Brian

One of the larger fallouts from the accounting scandals of the past several years is that the investing public has begun to believe that accounting and auditing can be an exact discipline. They can't be.

Because accounting and auditing require the use of judgment and accounting estimates, the most effective auditors are those who exercise professional skepticism and good judgment, gather sufficient and competent audit evidence, and assess that evidence adequately.

Of course, the quality of an audit can be found in the quality of an auditor's judgment. So, how can auditors adopt technology in their analytical procedures to make more time available for the softer and more difficult task of improving their judgment decisions?

WADING THROUGH DATA

One of the largest challenges that CPAs and auditors have is the amount of data they must work with, which can sometimes make it difficult to decide between the important and the unimportant. It is also difficult to recognize trends. In essence, there is a distinct difference between accounting and auditing and financial analysis, yet both are pivotal to the analytical process.

There are so many transactions that make the auditor's job challenging, especially in cases of fraud or near fraud where the client has every incentive to muddy the records. How can the profession deal with this?

Recent legislative and regulatory rulings give the appearance that the profession is dealing with problems. However, whether or not these reforms get to the heart of the real challenge--which is to minimize or make easy the technical or rote parts of an audit and allow more time for the judgment components--is another matter.

However, if the technical parts of an audit can be made easier through technology, then more time can be devoted to the qualitative parts. If auditors are spending so much time on the rote parts of an audit, such as calculating expected values, then little, if any, time is left for a broader analysis of the business.

Statement on Auditing Standards No. 99, which establishes standards and provides guidance on planning and performing an audit, requires the auditor to consider "the results of analytical procedures performed in planning the audit."

Using technology in performing analytical procedures will likely result in a more efficient process, but it's only one aspect of evidence-gathering. SAS 99 requires that the results of those analytical procedures "be considered along with other information...