Big data can reveal many opportunities for improving your business, but extracting the precise information you need can be a struggle.
“Some companies today have more than 30 years worth of data. Their databases are so large that it’s difficult to get a handle on them,” says Joe Welker, CISA, IT audit manager at Rea & Associates.
Using data analytics software, auditors can analyze the data and prepare reports that enable companies to improve inventory, billing and other processes.
“It allows us to be more efficient, which means lower cost for companies because less time is spent on the audit,” says Michaela McGinn, CPA, principal and director of audit services at Rea & Associates.
Smart Business spoke with Welker and McGinn about how the software functions and the benefits it can provide.
How does the software work and what information does it allow you to find?
McGinn: It’s designed for auditing and is used to find missing vendor address information, vendor payment summaries, duplicated invoices and payments made to vendors with missing address information, to name a few. Reports given to us by a client are imported and converted, allowing us to see the data field by field. For example, we can look at inventory numbers of what the company has now compared to what it had three years ago.
Welker: I just finished an audit in which we imported accounts payable and payroll check registers into the software. We went through that data to see if there were any gaps in check numbers or duplicate checks. We also profiled the data in order to give the company a summary of payroll check registers. This allowed management to see how many times a person was paid and their net pay for the year. It was a new way for them to analyze the data.
So the software makes it’s easier to locate the specific data you want?
Welker: Yes, because you’re reviewing 100 percent of the data rather than picking a sample. In one instance, a company had 8,000 vendor accounts built into their system. How do you control that? What if the same invoice is paid to two different vendors, either accidentally or intentionally?
Ultimately, we found that they had 900 duplicate vendors. The software was utilized to look at the check register to see if any payments were made to both vendors — through the main account and the duplicate. Since names don’t have to be spelled exactly, anything that is close came up. That helped the company identify anything that was out of line or looked like it shouldn’t be paid.
How do you know what to look for?
McGinn: It a good rule of thumb to look for the worst. Not everyone is embezzling or committing fraud, but it happens. The best way to stop that behavior is to let everyone know that someone is watching. Controls sometimes become lax and you never know when someone will get into a situation where they’ll do something they might not otherwise do.
Welker: As a result of audits, controls are usually tightened and we’ll provide suggestions. In the case of the client with 8,000 vendors, it was important they heard about potential problems that can result from that scenario. Data analytic software was able to provide a list of the vendors they had transactions with in the last five years so they could clean up the master file.
What types of businesses can benefit from an audit using this software?
McGinn: It can be used in small- to medium-sized businesses of every type. The benefits go beyond just identifying fraud — finding inefficiencies and areas of cost savings are two big reasons for an audit. Many larger companies have their own internal audit departments to analyze data, but most other businesses don’t have access to this type of analytics.
Welker: A statistical analysis of data for things like increasing costs, missing inventory and invoicing can help a business substantially. And once a company’s data is inserted into the software, the process is easier the next time. Results are produced in minutes, saving time and money. ●
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