Addressing the C-Level Question: How Effectively are Assurance Functions Contributing and Using Automated Analytics?

Abstract

This article addresses the questions: Are internal and external auditors on the correct path with their use of analytics? Is management getting what they need or are they shifting annual expense and capital investment away from audit and expanding their deployment of compliance functions to meet their responsibilities? We explore the expanding focus on the use of automated analytics by internal and external audit and summarize the recent Financial Executives Research Foundation research published in July 2016, titled: “Data Analytics and Financial Compliance: How Technology Is Changing Audit and Business Systems.” We focus on internal audit and developments in the external audit, including a new project the American Institute of Certified Public Accountants and Rutgers University are leading called the Rutgers AICPA Data Analytics Research Initiative: looking into how the accounting firms can work together to advance their use of technology and analytics to improve audit effectiveness and efficiency.

Notes

1. KPMG and Forbes, “Seeking Value Through Internal Audit” (2016), https://advisory.kpmg.us/content/dam/kpmg-advisory/risk-consulting/pdfs/2016/iarcs-seeking-value-through-internal-audit.pdf

2. IIA Position Paper, “The Three Lines of Defense in Effective Risk Management and Control,” January 2013.

3. M. P. Cangemi, “Internal Audit’s Role in Continuous Monitoring,” EDPACS 41(4) (2010).

4. M. P. Cangemi, “Staying a Step Ahead—Internal Audit’s Use of Technology” (2015), http://contentz.mkt5790.com/lp/2842/191428/2015-1403_CBOK_Staying_A_Step_Ahead.pdf

5. M. P. Cangemi, “Views on Internal Audit, Internal Control, and Internal Audit’s use of Technology.” EDPACS (2016).

6. M. P. Cangemi and T. Singleton, Managing the Audit Function, Third Edition (Hoboken, NJ: Wiley & Sons, 2003). Also available from Wiley as a download (www.wiley.com), it has formed the basis of many IA department procedures manuals.

7. M. P. Cangemi and W. Sinnett, “Data Analytics and Financial Compliance: How Technology Is Changing Audit and Business Systems” (2016), http://www.financialexecutives.org/ferf/download/2016%20Final/2016-012.pdf

8. M. P. Cangemi, “Internal Audit’s Role in Continuous Monitoring.” April 2010, Vol 41, No. 4.

9. AICPA Audit Data Analytics projects, https://www.aicpa.org/interestareas/frc/assuranceadvisoryservices/pages/auditanalytics.aspx

10. Rutgers AICPA Data Analytics Research Initiative (RADAR) project, http://raw.rutgers.edu/radar.html

11. “Trumps Man for the SEC: Time to Ease Regulation,” Wall Street Journal February 18, 2017; Sarah N. Lynch, “Trump’s SEC Pick Clayton Points to Capital Formation, not Enforcement, ” Reuters January 5, 2017, http://www.reuters.com/article/us-usa-trump-sec-idUSKBN14N1Y9

12. T. Leech, “Is Internal Audit the Next Blackberry?” April 2017, Vol 55, No. 4.

Additional information

Notes on contributors

Michael P. Cangemi

Michael P. Cangemi is a prolific writer, active speaker and has had a wide-ranging career having served as a CAE, CIO, CFO, and then in two CEO positions, as well as on Boards and as AC Chair. His experiences as a CAE were published in his second successful book, Managing the Audit Function. The book, now in a third edition, was featured in the business section of the Sunday New York Times in August 2002 and translated into Chinese in 2005 and Serbian in 2013. Mr. Cangemi now has a significant focus on Technology for Business and specifically Continuous Monitoring and Analytics for GRC, Finance, and Business Process Improvement. He is a Senior Fellow at and serves on the Rutgers Continuous Auditing and Reporting Lab—Advisory Board, a Senior Advisor to Oversight Systems (CM & Analytics), CaseWare RSM (CA & CM Analytics); and he is an investor in and periodic advisor to Solink Corp (Video & Contextual Analytics). He has served in numerous volunteer positions at IIA and ISACA, including ISACA International President and IIARF Trustee. He went on to serve as Editor-in-Chief of the ISACA Journal for 2 decades, as well as serving as a COSO Board Member, 4 years on the Financial Accounting Standards Advisory Council (FASAC), and 2 years on the International Accounting Standards Board-Standards Advisory Council in London. These and other positions give him an excellent window into the audit & financial communities. A CPA and CISA retired he was President, Chief Executive Officer, and Director of Etienne Aigner Group, Inc., a leading designer of women’s accessories and President and Chief Executive Officer of Financial Executives International, the professional association for senior-level corporate financial executives. He currently serves as President of Cangemi Company LLC, which he founded, and through which he serves as senior advisor and director to various companies and manages his other business interests. He also serves on FEI’s Committee on Finance & Technology (CFIT) and their GRC Sub Committee; the EDPACS Editorial Advisory Board; and the ISACA Governance Committee.

Other publications and research by M. P. Camgemi include:

• ● FEI Research Paper, “The Benefits of Continuous Monitoring,” CM Research Project for C Level Executives (Financial Executives Research Foundation, 2011).

• ● Guest Editorial, “From Continuous Assurance to Continuous Monitoring—You Should Be the Champion!” (ISACA Journal, July 2012).

• ● “The New Era of Risk Management:Collaboration Across the Business, Risk, Compliance and Audit” (EDPACS August 2013).

• ● “Performing a Strategic Risk-Based Assessment: Integrating Data Analytics into the Audit Universe” (EDPACS May 2014).