Michael Alles Rutgers Business School Glen Gray

Transcript:Michael Alles Rutgers Business School Glen Gray:
Michael Alles Rutgers Business School Glen Gray California State University, Northridge the pros and cons of using big data in auditing: a synthesis of the literature and a research agenda Tremendous interest in Big Data by audit practitioners All Big-4 heavily investing in Big Data. For example, Deloitte Chairman and CEO Joe Ucuzoglu writes: “At Deloitte we’re investing several hundred million dollars in data analytics and artificial intelligence with some cutting-edge applications that we really believe differentiate us and our audit approach. When we use these tools, we’re able to get greater coverage. We’re able to more quickly identify risks. We’re able to complete the audit with a higher level of quality and ultimately deliver a greater level of insight to our clients.” PWC doing pilot of 10 audits with Big Data etc. 2 Academic researchers also very excited Numerous paper in the June 2015 special issue of Accounting Horizons on Big Data. 180 attendees at the September 2015 American Accounting Association conference titled “Accounting IS Big Data”. Many researchers turned away for lack of space. But… Articles equally optimistic to the Accounting Horizons Big Data articles (some by the same authors) were published in the past about AI, expert systems, data mining, and continuous auditing. History of technology applied to auditing is not promising. 3 Recognize the challenges that Big Data poses in the auditing context Using a client’s Big Data as regular part of that client’s financial audits would be a paradigm shift, requiring unprecedented access to proprietary and sensitive client data that are outside tradition data requested during an audit; a significantly higher reliance on non-financial data (NFD), which auditors have been reluctant to use in the past because it’s not clear how validate this non-GAAP data; increased technical skills on the part of the audit team; and increased business acumen to determine what data to analyze and how to interpret the results. Just because Big Data adds value for audit clients doesn’t mean it has to do the same for auditors. 4 Apply some “professional skepticism” to the adoption of Big Data by auditors The objectives of this paper are to: (1) provide a balanced discussion of both the pros and the cons regarding incorporating Big Data into financial statement audits; and (2) present a research agenda to identify specific aspects of Big Data that could benefit auditors. Skepticism is not a negative in auditing, but