Data analytics and their impact on external auditing: an evaluation

Abstract

Purpose: The study will aim to see how data analytics will affect external auditing. The objectives of the study are to determine how the audit process is changing and how the efficiency of the audit is going to be affected with the further adoption of data analytical tools. Design: In this study, the researcher used both primary and secondary data. Primary data was gathered through a number of semi-structured interviews. Secondary data used for the purpose of this study was collected from online journals, books, papers, articles, International Standards on Auditing and related studies. Findings: The study focuses on nine main themes that have arose from the constant comparison method, these being size, efficient and higher quality, competencies of the auditor, information gathering, information analyses, standards, change management, mandatory, and future of the audit. Such themes explain the initiation that led audit firms to invest in data analytics. Conclusion: This study shows that practices which are used and applied by companies overseas, do not necessarily apply in small countries like Malta. It was also concluded that using such data analytical tools increases efficiency and is more effective rather than using the traditional way of conducting the audit. Moreover, it was discovered that the competencies of the auditor need to change, and training needs to be provided to auditors in order to be capable to use these tools effectively. In addition, a change in International Standards on Auditing is required in order to provide more guidance to auditors when conducting the audit. Finally, even though it was discovered that the way an audit is conducted needs to change in terms of data gathering and analysis, the professional judgement of the auditor remains important. Value: This study seeks to shed light on the use of data analytics within the auditing profession. As an initial attempt, such a study should enable audit professionals to benefit from it, given that this study highlights how the audit process and efficiency will change when implementing data analytical tools specifically within the Maltese scenario.