Why CFOs Should Care About Audit Analytics: A CFO’s perspective

In today's dynamic business landscape, the role of the Chief Financial Officer (CFO) is undergoing a profound transformation. The modern CFO is a strategic partner, driving financial transformation and navigating complex risks. An important tool in this evolution, is one that is frequently overlooked: audit analytics.

This blog draws insights from an interview with Varun Tejpal, former CFO of GE's Global Operations, who shared his perspective on the growing importance of audit analytics in modern finance. As Varun shared:

Traditional, manual audit processes are no longer sufficient. To thrive, CFOs must embrace technology and data-driven insights.

One of the more compelling reasons for CFOs to prioritize audit analytics, is its potential to significantly reduce costs. External audits are a costly undertaking. As Varun noted, "External auditors come in every year and spend hours to clean up my data, build dashboards, figure out samples to target—which simply increases the cost of my audit."

By leveraging audit analytics, CFOs can provide external auditors with pre-analyzed data and insights, reducing the time and resources required for their work. This leads to lower audit fees and a more efficient audit process. Furthermore, internal teams can spend less time on tedious data preparation, freeing up resources for higher-value activities.

Internal audit teams are often lean, making it crucial to maximize their impact. Audit analytics empowers these teams to focus on the areas where the risk is greatest. As Varun stated, "Given the typical size of internal audit teams, in order to get maximum impact from the team, they need to focus on the right areas. Audit analytics helps the team pinpoint issues and address them before they could become a bigger issue."

By using analytics to identify anomalies and potential risks, internal auditors can move beyond traditional, sample-based testing and focus on areas with the highest risk. This allows them to uncover hidden issues and provide more targeted insights to management.

Traditional audits are often retrospective, focusing on what has already happened. However, what's important for today's CFOs is the need to be proactive, anticipating and mitigating risks before they materialize. Audit analytics enables this shift. "Audits traditionally look through the rearview mirror. I want my team looking through the windshield at what's coming up, quickly identifying red flags and finding out why they're occurring so they don't happen again," Varun explained.

By analyzing financial data continuously and identifying trends, audit analytics can help CFOs identify emerging risks and implement mitigation strategies.

The rise of audit analytics is inextricably linked to technological advancements. As Varun pointed out, "Technology has helped enable this transition. Technology helps to automate many of the procedural aspects of audit which were manual in the past and are now automated. But more importantly, it has allowed the small teams to scale up and continuously monitor across all their financial data sources."

Automation eliminates manual tasks, reducing errors and freeing up resources. Machine learning and trend analysis capabilities further enhance the power of audit analytics, enabling CFOs to identify patterns and help predict future outcomes. "Being able to compare over time periods, helps identify potential problems. This is much smarter auditing," Tejpal said.

Helping CFOs to "see around corners" and address potential problems before they escalate offers the CFO the greatest value. "Leveraging analytics aids audit teams to find issues just as they're starting, in some cases, identifying them before they even occur. If I can fix an issue before it becomes a problem, the shift from reactive to proactive makes a huge difference," Varun emphasized.

Audit analytics can also provide valuable operational insights, extending its impact beyond traditional financial reporting. "Audit often sits at the end of the value chain. When audit teams help identify operational issues, it delivers incremental and important value to the business. Audit analytics helps teams to identify broken processes or operational deficiencies. For instance, if you're experiencing lots of receivable issues, this could be the red flag for quality problems at a factory, allowing the team to identify such and bring to the attention of the CFO," noted Varun. Another example is analyzing travel and entertainment (T&E) expenses that can reveal spending patterns and identify opportunities for cost savings. "Knowing T&E spend by a particular region or team and providing operational insight about that spend, helps to make the business more efficient and effective."

Ultimately, audit analytics helps transform the internal audit function from a compliance-driven activity to a more strategic one. "It is taking the internal audit function and looking at the team as risk management resources—not simply auditors," Varun stated.

By providing data-driven insights and proactive risk management, internal audit teams can become valuable partners in driving business performance. "Internal audit is most effective when it highlights operational issues that a CFO can rally his or her team to resolve. Audit analytics helps the internal audit team to do so."

Audit analytics, is increasingly important for CFOs seeking to drive financial transformation and navigate the complexities of today's business environment. By embracing technology and data-driven insights, CFOs can reduce costs, maximize the impact of their teams, proactively manage risks, and transform internal audit into a strategic asset. The future of finance is data-driven, and CFOs who embrace this reality will be well-positioned to lead their organizations to success.

Interested to learn how Supervizor can help make your internal audit team more strategic and effective? Let us know and we'll show you how.