Government agencies conduct audits for many reasons. Some are external, such as tax audits at the state or federal level or audits of agency processes, such as those carried out by the Government Accountability Office. Others are internal, undertaken whenever agency leaders want to better understand how a system or process is working.
Whether internal or external, some audits could be moved into the virtual realm―and option being made possible by big data analytics. Virtualizing audits enables significant increases to efficiency. In the world of tax administration, for example, it could allow auditors to tap different data sources to select audits more accurately based on the level of risk, and to use new tools to automate the repetitive tasks of an audit. Auditors could then focus only on exceptions.
Big data analytics already has had an effect on the quality and relevance of audits, but the impact has been limited by inefficient technologies, inconsistent data capture and concerns over privacy. But, recent technology advancements are providing agencies an opportunity to rethink the ways in which they carry out their audits.
With big data analytics in the toolbox, auditors can expand their sample size to include analysis of entire populations. They can draw on artificial intelligence to deliver a higher quality of audit evidence and more significant business insights. Auditors also can use big data analytics to better identify fraud in financial or tax reporting, or spot operational business risks. And they can do it with an open source solution rather than expensive third-party software.
However, numbers do not always tell the entire story. Auditors must also bring their own judgment to results of the analysis in order to develop a complete picture. A ground-up initiative is needed to establish the proper implementation and enablement of government agency programs to ensure audit teams can effectively integrate big data analytics into the audit process.
Key priorities for audit virtualization for agencies include:
- Create a paperless environment
- Consult with business units on what to measure and how to measure it
- Standardize processes
- Formalize audit risk measurement
- Let the process drive the data to be collected
- Avoid gathering data that doesn’t fit the need
Among its benefits, audit virtualization:
- Incorporates cost savings by using an open source solution
- Provides a direct connection to data, often without physically moving it
- Protects classified information during the audit process
- Greatly reduces or eliminates the need for travel in conducting an audit
- Produces accuracy and timeliness of results
- Enables one open source tool to replace proprietary systems
- Provides tax or accounting risk consistent with government risk profile
Audits of the future may not look much like audits today. With digitalization and virtualization at hand, auditors can use larger data sets and draw the data in from multiple sources without having to move physical equipment or transfer files from one computer to another.
For more information on how emerging technologies and innovative practices—in big data analytics and other disciplines—are transforming compliance and tax administration, read these posts from some of my CGI colleagues:
“Solving the big data challenge in tax administration,” by John Goodwin
“How behavioral science improves tax compliance,” by Gordon Smith
“3 trends in behavioral science that could boost tax compliance,” by Kate Thomas
About this author
Dr. Karina Kasztelnik is a Director of Consulting in CGI Federal’s Regulatory Agency Program division where she helps to bridge the gap between technical modeling needs and business issues with a strong skillset in data science and big data engineering. She holds a Ph. D. ...