• Home
  • About
  • Subscribe
  • LATIF
  • Conferences
  • Dashboard
  • Edit My Profile
  • Log In
  • Logout
  • Register
  • Edit this post

Room 151

  • 151 BRIEF

    What's New?

  • Underfunded social care reforms could ‘exacerbate workforce pressures’

    June 27, 2022

  • Nottingham City Council leader labels proposed intervention as “disappointing”

    June 27, 2022

  • Government preparing to intervene in Nottingham City Council

    June 23, 2022

  • Low earners at Surrey County Council receive 7.85% pay increase

    June 23, 2022

  • UK Infrastructure Bank launches plan to deploy £22bn of investment

    June 23, 2022

  • LGA: councils facing service and job cuts due to National Living Wage increase

    June 21, 2022

  • Treasury
  • Technical
  • Funding
  • Resources
  • LGPS
  • Development
  • 151 News
  • Blogs
    • David Green
    • Agent 151
    • Dan Bates
    • Richard Harbord
    • Stephen Sheen
    • James Bevan
    • Steve Bishop
    • Cllr John Clancy
    • David Crum
    • Graham Liddell
    • Ian O’Donnell
    • Jackie Shute
  • Interviews
  • Briefs

Graham Liddell: Data analytics and the internal audit evolution

0
  • by Graham Liddell
  • in Blogs · Graham Liddell · Technical
  • — 26 Sep, 2016
Graham Liddell

Graham Liddell

There is a 94% probability that our audit jobs will be replaced by robots over the next 10 to 20 years (Frey and Osborne: The future of employment. How susceptible are jobs to computerisation? September 2013).

All those traditional manual compliance checks can be taken over by increasingly sophisticated automation and then by artificial intelligence. And we can see some of that already: do you remember when auditors assiduously checked a sample of 20 purchase invoices to check whether they were supported by properly authorised order forms? Now we can find out this information for all purchase invoices just by running a business objects report.

But internal audit is so much more than just reporting compliance levels. A good internal auditor provides valuable, evidence based, insights and practical recommendations to management by using their professional expertise and local knowledge. Sooner or later artificial intelligence will be capable of taking on this role, but this is still some way off.  Computers aren’t great at interacting with people or making creative leaps of imagination. And the human brain still retains an edge in our ability to make sense out of patterns. So how do we use these advantages to keep internal audit relevant? In other words, how do we increase the 6% chance of retaining human auditors?

Here’s my 5 point plan

  • Embrace the change

Let’s get excited by the opportunities that better and more sophisticated data analysis provides us. This is our space and we need to be taking the lead. We should be using data analysis techniques as a matter of routine and internal audit should be seen as leaders in the way we use and interpret data.

  • Get to grips with the subject matter

There is a confusing array of terms: big data, data analytics, data matching, data science and so on. We need to understand the terminology and be able to talk, in plain English, about what these terms mean and how they apply to internal audit and our clients. I recommend setting aside some spare time with some Google and then talking through with some trusted colleagues. The only snag is that quite a few of the articles out there seem intent on trying to confuse rather than enlighten. Here is a great article to get you started: big data and analytics.

  • Set out your stall

We need to be clear about what we want to achieve in a simple terms as possible. Which are the key areas we want to expand and integrate into the way we carry out our audits? These might include:

  • moving beyond NFI to use data matching as part of our everyday work to identify and investigate potential fraud
  • testing compliance by interrogating the whole population rather than by sampling techniques
  • exploiting and presenting data imaginatively to:
    • identify trends and themes to direct audit work (e.g focussing on services that are showing high levels of non-compliance)
    • demonstrate the impact of audit findings (e.g showing that there is a correlation between overspending services and failure to follow routine financial control procedures)
  • challenging the way our clients use data to manage their services.

And to give the implementation a bit of bite, we also need to establish some performance measures with some SMART targets which we can track over the next two to three years.

  •  Provide team members with the skills and time to develop 

Critically we need to give our teams the skills, confidence and space to change the way we carry out our audit work. All auditors will need to develop their skills. In addition we need to:

  • identify our data analytics evangelists and provide them with the specialist training and time to support other team members
  • make sure that auditors have time when scoping their audits to consider how to use data analytics. We also need to spend time evaluating and the effectiveness of each audit as part of the completion stage. It has never been acceptable to simply copy what was done last year, but the stakes are getting higher and we need to see radical change
  • celebrate and learn from our successes.
  • Don’t throw the baby out with the bath water

Finally, we need to remember that this isn’t just about processing and examining large volumes of data. Yes, we can make big gains by using data in a much more sophisticated way but this doesn’t remove the need to look at the detail, for example through in-depth case studies. We may be able to move away from statistical sampling, but audit insight comes from understanding the way an organisation works in practice.

Graham Liddell is head of Internal Audit at Brighton & Hove City Council.

Get the Room151 Newsletter

Share

You may also like...

  • How to be net zero by 2030 23rd Feb, 2022
  • An ethical charter for responsible investors 18th Oct, 2021
  • Fixed income investing can help target both financial and sustainability targets 3rd Mar, 2021
  • Audit improves but problems and uncertainties remain 4th Nov, 2021

Leave a Reply Cancel reply

You must be logged in to post a comment.

  • 151 BRIEFS – WHAT’s NEW?

    • Underfunded social care reforms could ‘exacerbate workforce pressures’
    • Nottingham City Council leader labels proposed intervention as “disappointing”
    • Government preparing to intervene in Nottingham City Council
    • Low earners at Surrey County Council receive 7.85% pay increase
    • UK Infrastructure Bank launches plan to deploy £22bn of investment
  • Room151’s LGPS Roundtables

    Biodiversity
    Valuations & Risk
    LGPS Women

  • Room151’s LGPS Roundtables

    Biodiversity
    LGPS Women
    Valuations & Risk
  • Latest tweets

    Room151 4 days ago

    Conrad Hall: ‘more sophisticated’ regulation needed for local government: The chair of the CIPFA/LASAAC Code Board has questioned the sophistication of financial regulation in local government and the continuing focus of the Department for Levelling Up,… dlvr.it/SSnPBV pic.twitter.com/G5d7JCWF8c

    Room151 6 days ago

    Slough Council approves plans to restructure finance department: Slough Borough Council has approved plans to restructure its finance department to enhance capacity and capability and to address a “significant weakness” in the function. The local… dlvr.it/SSf8DG pic.twitter.com/l5lmyHmkBg

    Room151 7 days ago

    Job Alert: Various Finance Roles: lnkd.in/eRKRvhJb pic.twitter.com/KkBrjXxAYD

    Room151 1 week ago

    MRP on capital loans: a step in the right direction: David Green says the latest government proposals on Minimum Revenue Provision should be welcomed by local authorities. There are still some unintended consequences, but the suggested approach for… dlvr.it/SSZ7JK pic.twitter.com/M1W9qVgYWN

    Room151 1 week ago

    MRP U-turn welcomed but ‘unintended consequences remain’: Local authority finance directors and treasury advisers have welcomed the government’s revised Minimum Revenue Provision (MRP) proposals, while pointing out that some unintended consequences still… dlvr.it/SSWvY0 pic.twitter.com/sGglpVNFs3

    Room151 1 week ago

    Mike O’Donnell: ‘progress on LGPS asset pooling needs to go further and faster’: The CEO at the London CIV pension pool has called for progress on pooling the assets of the Local Government Pension Scheme (LGPS) to accelerate. Mike O’Donnell told… dlvr.it/SSWvWV pic.twitter.com/rE1NjbMCCq

    Room151 1 week ago

    Mike O’Donnell: ‘progress on LGPS asset pooling needs to go further and faster’:The CEO at the London CIV pension pool has called for progress on pooling the assets of the Local Government Pension Scheme (LGPS) to accelerate. @London_CIV room151.co.uk/local-governme…

    Room151 1 week ago

    JOB ALERT: Watford Borough Council & Three Rivers District Council, various roles:       Technical Accountant Career Grade: We are looking for a motivated team player to join our Finance Department. The post holder will gain experience across these… dlvr.it/SSWN8f

    Room151 1 week ago

    Inflation and the LGPS: Local government pension payments will rise significantly next year based on the inflation rate this September. William Bourne discusses whether funds should be looking for some protection by turning to[...] dlvr.it/SSVK9x pic.twitter.com/7zH9OkRo1d

  • Register to become a Room151 user

  • Previous story Richard Harbord: Public service reform and the risk of section 114s
  • Next story LGA counts cost of academisation

© Copyright 2022 Room 151. Typegrid Theme by WPBandit.

0 shares
We use cookies to ensure that we give you the best experience on our website. If you continue without changing your settings, we'll assume that you are happy to receive all cookies from this website.OK