Auditors Can Deliver Accurate, Swift Results with Integrated Business Intelligence Tools

When an enterprise engages in an audit process, it must have access to data from numerous systems and sources. This data will play a crucial role in gathering facts, analyzing processes, getting to the heart of issues and problems, uncovering and mitigating risk and reporting findings.

A stable, high-performance business intelligence solution can create a dependable, accessible environment in which to analyze and report findings in a way that is meaningful to the auditor's role and responsibilities, and provide flexible tools to translate and convert findings into reports that are easily understood by management teams, executives and others. When an enterprise or audit team can leverage the existing technology and systems investments to compile, integrate and deliver information, it will face fewer obstacles and deliver results in a more timely, and cost-effective manner.

BI Tools can help the enterprise in the short-term and in the long-term by providing a scalable, self-service environment in which auditors can perform analysis and implement, monitor and manage ongoing audits and processes to manage risk and identify issues related to security, compliance, regulations, policies, procedures and financial factors. With the right business intelligence tools, auditors can deliver and enjoy results immediately with mobile, personalized dashboards and features like key performance indicators (KPIs), balanced scorecards, predictive analysis, and layered security that allows for appropriate access and protects data and confidentiality.

Where technology-based audit products are in use, the ability to integrate BI tools and see data in one place is undeniably valuable. Because these business intelligence solutions allow for drag and drop report building, auditors do not have to wait for IT to develop and deliver reports. They can design reports on the fly to meet the needs of a particular audit requirement, or establish specific periodic reports for automatic delivery.

Whether an auditor is working with process or data owners, or developing business cases or reports, a BI tool with sophisticated, easy-to-use features allows individuals and teams to satisfy ever-changing requirements and supports fact-based enterprise decisions. The organization can respond to internal and external audit requests and avoid delays in data analysis. The organization can optimize resources and receive and use clear, up-to-date data, so it can ask and answer the right questions and avoid risk.

Auditors can help process owners and organizations to establish objective controls and provide the tools the organization will need to monitor these controls, thereby simplifying auditor follow-up and ensuring that input, output and monitoring processing and controls are clear to everyone in the organization.

If an auditor (and an organization) can anticipate and resolve issues as they occur, and work with clear objectives and goals, the team can avoid playing catch-up and putting out fires and engage in a proactive, optimized process that will ensure success and positive results for everyone concerned.

Business Intelligence tools can be a great help in establishing and sustaining this foundation and can make the job of an audit team easier and faster and deliver more dependable results. 

Snehal Rathwa - I am working as BI consultant and aim to empower my clients with self-serve Business Intelligence with unbeatable ROI. Apart from this, I like playing badminton, table tennis and reading about current affairs.

(Author can be reached at By- Sonu Mehla Mobile- 8285910007 E-Mail- sonuandfirm@gmail.com)

Standards on Auditing - Not a choice but a compulsion

What are Auditing Standards?

The Standards on Auditing is an area which requires greater focus of CA in practice as well as our administrative bodies who are updating our members. The Companies Act 2013 has discussed it in detail which was absent in erstwhile act.

As per Sec 2 (7) “auditing standards” means the standards of auditing or any addendum thereto for companies or class of companies referred to in sub-section (10) of section 143.

Sec 143 (9) reads “Every auditor shall comply with the auditing standards.”

                As per Sec 143 (10) The Central Government may prescribe the standards of auditing or any addendum thereto, as recommended by the Institute of Chartered Accountants of India, constituted under section 3 of the Chartered Accountants Act, 1949, in consultation with and after examination of the recommendations made by the National Financial Reporting Authority:

Provided that until any auditing standards are notified, any standard or standards of auditing specified by the Institute of Chartered Accountants of India shall be deemed to be the auditing standards.

Sec 147 (2) If an auditor of a company contravenes any of the provisions of section 139, section 143, section 144 or section 145, the auditor shall be punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to five lakh rupees:

Provided that if an auditor has contravened such provisions knowingly or wilfully with the intention to deceive the company or its shareholders or creditors or tax authorities, he shall be punishable with imprisonment for a term which may extend to one year and with fine which shall not be less than one lakh rupees but which may extend to twenty-five lakh rupees.

Sec 147 (3) Where an auditor has been convicted under sub-section (2), he shall be liable to—

1. refund the remuneration received by him to the company; and

2. pay for damages to the company, statutory bodies or authorities or to any other persons for loss arising out of incorrect or misleading statements of particulars made in his audit report.

The Sec 143 (9), (10) read with Sec 147 of the act clearly describes the importance of Standards on Auditing but many practicing CA has not dealt with it in detail and in most of the cases across mid-sized firm it has been noticed that Audit report are being drafted by articles and in small clients by the client itself. There are gap in documentations as required by Standards on Auditing.

In the Independent Auditors Report issued by the auditor, all the CA colleagues state that we have complied with Standards on Audit but many of us are not even aware the number of standards which are issued by our supreme body by which we had to comply earlier also and now mandated by the Companies Act  2013.

To clear the air there are 43 standards in all and one Standard on Quality Control which is SQC 1 for the Firm providing Assurance Service. These standards are based on International Standards on auditing and are divided in following Series and broad Categories.

Series	Category	Number
200-299	General Principles and Responsibility	9
300-499	Risk Assessment and Response to the Risk	6
500-599	Audit Evidence	11
600-699	Using work of Others	3
700-799	Audit Conclusion & Report	5
800-899	Specialised Areas	3
SRE	Standard in Review Engagement	2
SRA	Standard in Assurance Engagement	2
SRS	Standard in Related Services	2

There are many question which is enquired about how to comply with these standards in case of Small Entity but Companies Act 2013 does not differentiate between small entities and big entities.

The Audit Procedure to be followed should be as shown below diagrammatically.

Mapping of Process

We should know the process in which company is working, we would not be able to comment on Internal Financial Control of the company if we don’t map the process by flow chart with major areas being.

1. Sales
2. Purchase
3. Banking
4. Cash Management
5. Human Resource

Test of Control

Test of Control (TOC) is a walk through from point of initiation to point of completion of the samples selected on basis of statistical sampling as explained in standards on auditing. TOC has to been done for areas such as Purchase, Sales, Fixed Assets, HR etc, whereby we identify the weakness in control and thereby it helps to understand the extend of sample to be selected for substantial compliance.

Test of Details

Test of Details has been done for top 100 Expenses whereby the sample has been selected on materiality basis as defined in standards on auditing.

We should document whatever we do, AS 230 discusses in detail the audit documentation and few examples are as follows

• Audit Program – Before visiting client
• Analyses- Before visiting client
• Issue Memorandum-Issues noted at client place
• Summary of Significant matters – Summary of unadjusted entries
• Letter of Confirmation and representation
• Checklist – CARO, Schedule III, Inventory Count, Standards on Auditing, Last invoice number
• Correspondence and minutes of meeting

Advantages of Documentation

• Assist in Planning & Performing Audit
• Enabling Review of Senior Managers and Partners
• Control of Rectification entries past by client
• Quality Control Reviewer Partner to review
• Proper takeover of work from person leaving the assignment

Action initiated by Quality Review Board

As per report published by Quality Review Board (QRB) on 31st July 2015, the QRB had done 216 reviews between August 2012 - June 2015, a total of 175 review reports reviewing audits of top listed entities in India were finalized by the Board, 25 cases were recommended to the ICAI Council for consideration and in 74 cases appropriate advisories were issued to the concerned audit firms for improvement in future.

So, a total of 99 reviews out of 175 i.e., about 57% reviews indicated need for improvement in diverse areas.

In the said report, a summary of some of the observations noticed by the Technical Reviewers in respect of 155 reviews completed by QRB till 31 March, 2015 were provided and it is stated that number of issues were common to more than one of these audits mainly in the areas of

(a) compliance with accounting standards;

(b) compliance with standards on auditing mainly relating to, agreeing the terms of audit engagement, audit documentation, materiality in planning and performing an audit, audit evidences, communication with those charged with governance, responsibility of joint auditors, planning an audit of financial statements, identifying and assessing the risk of material misstatement through understanding the entity and its environment, auditor’s response to assessed risks, audit sampling, written representation letter, external confirmations, using work of another auditor, forming an opinion and reporting on financial statements;

(c) compliance with the Revised Schedule VI of the Companies Act, 1956 in relation to proper presentation of the financial statements and disclosure of amounts under respective heads in the balance sheet;

(d) compliance with relevant laws and regulations; and

(e) quality control. In most of such cases, the audit firms have represented that they will take actions to address such deficiencies in future.

For detail report refer http://www.qrbca.in .

Therefore in my personal view, audit is no more an ancillary service, it requires special attention and it’s the time we wake up and accept the change and start the journey of “learning, unlearning and relearning.”

The author can also be reached at sonuandfirm@gmail.com