We’ve all heard the saying “The devil is in the detail” – you’ve probably even said it yourself. Attributed to the French Novelist Gustave Flaubert (1821-1880) who said “Le bon Dieu est dans le detail,” it means that while things might appear simple at first glance, they often require more time and effort than anticipated.
In the context of auditing, this couldn’t be more accurate, especially when dealing with today’s complex business models.
In our data-driven world, it’s easy to assume that having access to data is sufficient. However, the reality is more nuanced: not all data is created equal.
As auditors, our role is to validate and discover what’s truly occurring within an organization, and for this, we need more than just data – we need high-quality, detailed, and standardized data.
The Data Dilemma: Quantity vs. Quality
Let’s consider a scenario where an auditor receives a large volume of unstructured, inconsistent data from a client. While the quantity might seem impressive, without the right level of detail and standardization, the auditor faces significant challenges in extracting meaningful insights.
Before exploring solutions to this challenge, let’s recap why detailed, standardized data is crucial for an effective audit:
- Accuracy Verification: Detailed data allows auditors to verify the accuracy of financial statements and reports at a granular level, ensuring compliance with accounting standards.
- Compliance Checking: Granular data enables thorough assessment of an organization’s adherence to relevant laws, regulations, and policies.
- Fraud Detection: Comprehensive, detailed data helps auditors identify patterns or anomalies that might indicate fraudulent activities and requires further investigation.
- Risk Assessment: In-depth data analysis allows auditors to better understand an organization’s risk profile and how potential risks might impact financial statements or operations.
- Historical Context: Detailed historical data provides crucial context for understanding trends, variations, and the reasons behind significant financial events.
- Transparency and Accountability: Providing detailed data promotes transparency and accountability, offering a clear view of an organization’s financial health and operational integrity.
When Data isn’t Good Enough: Real-World Consequences
When the quality of data falls short, it can have significant repercussions on the audit process:
- Planning Inefficiencies: In the risk assessment phase, incomplete or inconsistent data can lead to ineffective planning and generic questioning, rather than targeted, insightful inquiries.
- Execution Challenges: During the audit, disparate data sources and inconsistent formatting can lead to time-consuming manual processes, increasing the risk of errors and reducing the time available for actual analysis.
- Reporting Uncertainties: Inconsistent data can undermine confidence in audit conclusions, potentially leading to qualified opinions or recommendations based on incomplete information.
To summarize, it’s the audit equivalent of building a house on sand.
From Frustration to Innovation: A Personal Journey
As a CPA with over 40 years of experience, I’ve seen firsthand how inadequate data quality can derail even the most meticulous audit processes. It’s why I joined Validis.
Working closely with our team of talented technologists, we recognized the need to access all relevant data from client systems, including the often-overlooked sub-ledger details. Our goal was to ensure no transaction or data point would slip through the cracks.
Today, Validis addresses most of these challenges by providing a comprehensive solution that transforms raw financial data into a powerful tool for auditors:
- Standardization Across Platforms: Validis employs a single common data model to standardize data from various accounting systems. This consistency ensures that auditors can apply uniform analytical approaches regardless of the client’s accounting system.
- Depth and Granularity: Our system provides comprehensive ingestion of all accounting data, including AR and AP sub-ledger details with all underlying transactions. This level of detail allows auditors to drill down to the most granular level of financial activity.
- Integration Capabilities: The standardized data from Validis integrates seamlessly with existing audit tools, like DataSnipper, Suralink, Thomson Reuters, Trullion and more. This creates an efficient, automated workflow that enhances productivity and accuracy.
- AI Readiness: As artificial intelligence and advanced analytics become increasingly prevalent in auditing, the high-quality, standardized data provided by Validis ensures that these tools have the best possible input for generating meaningful insights.
Implementing a Data-Driven Audit: Start with Data
In the world of auditing, data isn’t just about having information – it’s about having the right information in the right format at the right time.
By addressing these fundamental data issues, you will enable your auditors to focus on what they do best – providing valuable insights and assurance – rather than grappling with data inconsistencies and limitations.
So, when prioritizing your digital transformation project, start with the data. And remember, you’re not just getting data; you’re unlocking a treasure trove of insights that can transform your entire audit process.
At the end of the day, we can all agree that better data leads to better audits, and better audits contribute to a more robust and transparent financial assurances for the businesses our economy is built upon.
Chat to me and the team to get a demo of Validis and see for yourself how user-friendly and granular our data is.
