“We are in the midst of an auditing renaissance,” says Dan Sunderland, who recently joined the D'Amore-McKim School of Business faculty after a 38 year career was capped with five years serving as the chief auditor at Deloitte & Touche.
The rise of big data has empowered auditors to change their evidence-gathering paradigm. They now can combine automation and sophisticated analytics to understand populations and identify outlier activity better.
“It's not a transformation for the sake of efficiency; it's a transformation for the sake of understanding,” says Sunderland. “It enhances the quality of the audit and allows auditors to spot relationships or anomalies they didn't know existed.”
In the past, auditors relied on a relatively small sample of transactions to draw broad conclusions. With the advent of tools to extract big data, they now have the entire body of the company's transactions at their disposals. But data alone is worthless; auditors need data analytics skills to take advantage of this wealth of information.
“In today's auditing world, you need to know how to tailor your analytics to grab the right data and create visualizations that will help you identify unusual activity or unique relationships,” says Sunderland.
This is why D'Amore-McKim's emphasis on data analytics is so important to a student's professional advancement. It is also why humanics—the combined knowledge of technology, data science, and the humanities—is so important to the auditing profession.
“To analyze data effectively, you also have to understand the world at large,” says Sunderland. “You need a solid knowledge of life itself in order to truly make sense of data and use it in an effective manner. No two audits are alike. Doing this well requires an ability to think, to create, and to analyze.”
Sunderland recently joined D'Amore-McKim as a Professor of the Practice, strengthening the accounting program with his extensive industry experience. During his 38 years at Deloitte & Touche, he worked closely with clients, bankers, lawyers, and regulators in addressing many accounting and auditing issues as they either emerged or arose during crises.
Sunderland emphasizes that many of the important elements of auditing cannot be automated because they revolve around estimates. There are just too many variables that require human judgement and cannot be put into an algorithm. For example, a number of companies in the past made products that had asbestos in them. That asbestos is causing health issues for their employees from long ago who now seek compensation in some fashion for this exposure. These liabilities could continue be incurred to 2050 or beyond–whenever the last of those employees have passed on.
“How can you ever make an accurate estimate of what your litigation costs will be in 2046 or 2048?” he asks. “Auditors need the skills to audit such estimates based on multiple variables. It's prognostication—or even alchemy – mixed with as many facts as you can possibly gather. At the end of the day, audit is art mixed with science.”
Sunderland believes this is an exciting time to be an auditor because you can mix the science of data analytics and the art of estimate analysis in order to audit a set of financial statements.
“You're a detective of sorts,” he says. “You're figuring out a puzzle, and there is a stopwatch running.”
In addition to auditing financial statements and, on occasion, ferreting out bad actors, auditors are now charged with evaluating controls that a company establishes to prevent future problems.
“At the risk of sounding overly dramatic, auditors are in a unique position to make sure things are good and right,” he says. “They are a very important cog in our capital markets and the overall economy. ”