Data Mining Education For External Auditors
Author(s)
A. M. Young
Abstract
The auditing profession is suffering a credibility crisis in the eyes of the public
due to the high profile collapses of many large companies and indeed one of the
largest accounting firms in the world, amid fraud and professional breaches.
Regulators are strengthening requirements and the auditing profession is once
again working towards \“educating” the public about what they should be
expecting from the auditors. A revolution is seen to be necessary whereby
external auditors, via the support of regulators, apply data mining techniques to
improved financial reporting requirements in the context of electronic data
collection. The public would be provided with more of their expectations
including better predictions of fraud, errors and company failures.
Keywords: expectation gap, exploration, deployment.
1 Introduction
The auditing profession is embroiled in another credibility crisis or what has
been described by Kahn [5] after Enron’s bankruptcy as a \“crisis in confidence”.
Tomasic [8] notes that \“on the heels of corporate collapses, we are in many ways
witnessing a fundamental crisis of trust”. It is proposed in this article that current
external auditing practices are outdated, insufficiently rigorous and are
contributing to the expectation gap between what the public expects from the
auditors and what they are delivering. Data mining techniques are suggested to
close this expectation gap and revolutionise how auditors undertake their work.
It is acknowledged that legislative support would be required to ensure suitable
data is captured and stored to make the changes work. Whilst the Australian
auditing standards pay some lip service to introductory data mining techniques in
its standard on analytical procedures (AUS 512) [4], little has been done to
support the application of the techniques and employ more rigorous and suitable
techniques.
Keywords
expectation gap, exploration, deployment.
Related Book
Other papers in this volume
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