How are leading audit firms dealing with bank data collection?  

In a conversation with BDO and Grant Thornton UK, we explore how they used to collect bank data in the past, the challenges around this, how they are doing it now, and what they think the future will bring. By implementing technology, both achieved significant improvements which we will explore further in this article.

Our guests:

Bethany Duffy

As Digital Audit Associate at Grant Thornton, Bethany is in a unique position to comment on her experiences with collecting, managing and working with data in her day-to-day role at a leading audit firm.

Greg Homer

Director at BDO working in Data Analytics Technology Risk Assurance. Greg has over 14 years of experience in Digital Financial Audit, spanning technology and data risk matters, including risk and finance analytics, data strategy and data governance.

The status quo: client-led bank data provision

We often hear from customers and other who join us in conversations that bank statements are still largely collected by paper, a situation that can be frustrating both to auditors and their clients. Receiving this vital information via this channel takes a lot of checking, chasing, standardising and processing before this data is a usable part of a digital workflow.  

Greg elaborates: “Typically, our financial teams would get data in any way possible. So, in some cases it would be PDFs, in other cases paper statements, CSV downloads, or Excel documents: It would mean we'd have a lot of inconsistency in terms of the approaches by different audit teams, making it harder to deploy methodology in a consistent way and to ensure our teams have the complete and accurate population.”  

And Bethany explains how it used to work at GT: “Previously, we would go on-site with the client, or when COVID hit, it would be screen sharing: we'd have to sit and watch all of these 12-monthly reports. Not only is that time consuming for us, it's also time consuming for the clients.

What’s more, the data we get out of being on-site or during screen-sharing is not actually that useful: we can't filter, we can't sort. The other big issue is that CSVs and Excel files can be edited. To address those main points, there is a big opportunity to be had with Open Banking and other technology.”  

We see what Greg and Bethany mentioned reflected in the results of the poll we held in the webinar, in which we asked the question: What is the most common way you receive bank statements today?  

64% of respondents indicated they are receiving this data via paper or PDF. This data isn’t usable in the form in which it is received, meaning extra effort has to be made to transform it into something which is usable and tangible on an audit file.

This means time spent on collating and ingesting data, time that could and most likely should be focussed on testing.

The now: leveraging technology for independent sourcing of data

How can we move from the challenges of the status quo towards a model that leverages available tools and paves the way to further innovation?

Direct-from-source bank data collection is part of the now: standardised data, direct from source, from one single provider. The final component of this is being able to build upon that to unlock further options and possibilities.  

Open Banking is the cornerstone of obtaining transactional data smoothly and directly from the source.  So how is this being leveraged at GT and BDO?

Bethany explains: “The standardisation is a real key piece for us, not only the standardised data, but the fact that we can also get a standardised process. We use the Circit dashboard for this, but also APIs which we then add into our processes, that ensures that we have this consistent and standard approach that all audit teams can use. Ultimately, it gives us increased assurance over that cash balance, because what we get is direct from the source and there is no potential manipulation of that bank account.

We back this up with training to educate local audit teams in the use of Open Banking and to show them the real benefits: for them, and for the quality of their work.”

Open Banking can be leveraged with or without custom-built systems and processes, via APIs. Firms will need technical expertise in-house to build out API connections and integrate with existing systems. Firms that don't have the capacity or teams to do that can opt for a platform like Circit which takes care of that component for them, not only providing the opportunity to start unlocking efficiencies and improving audit quality, but also minimising the time to realise the benefit on their engagements.  

Greg: “We've actually taken the decision to build our own in-house solution to ingest that bank data automatically and share with the individual teams what we want them to do. That enables us to tie it very tightly to a methodology and approach an ultimate documentation audit file. We're able to do that quite efficiently, and to a high quality, because of the features we get with Circit.  

The feedback from our teams is only positive: they want more, and they want to use it on more audits. A big challenge around analytics will always be getting data, but we're now starting to solve some of those challenges, specifically in terms of audit quality, efficiency and insight.”

The future: towards automated testing?

On that hopeful note, we turn to the last topic we discussed in the webinar: the future that is being unlocked by Open Banking developments. Can we move towards automated testing, such as automated ledger testing: taking a general ledger extract from the client, and automatically matching to independent banking data obtained through open banking?

Looking 2 years ahead, what are the hopes in the teams at BDO and GT?  

Bethany: “Once you've got the banking data, it sparks this kind of explosion of innovation as to what you can do with it. It gives us a wealth of insights and analytics. There is also automated ledger matching coming within reach. Previously, we wouldn't have dreamed of doing any of these things, but now we are starting to look into it.  

Open Banking can be particularly helpful with cash work, as it will allow us to really have that pervasive impact on what we do on cash. It's not just decreeing it to a bank letter, we can look at the cash balance over a period of time, we can start to look at the health of a business, we can see bumps coming in the road in advance of when they actually happen.”

Greg: “The hope would be to move into automated matching en masse: to bank confirmations, digital bank confirmations, matching to the ledger and subledgers. With Open Banking and this data coming through, it makes it more accessible for more of our audit bodies.

We'll also have that greater history of data that’s needed to do more profiling over time: previous performance, current performance, even predicting future performance. At the moment, we’re generating 15 months’ worth of data. We're able to build that up over time, so in the future we can use 24-36 months to inform analysis. In terms of audits, it becomes more about what we expect, as opposed to what we are doing.”

Open Banking is the foundation of unlocking those things. A platform like Circit can help bring this within reach for teams that don't have the in-house expertise to build these systems themselves. A purpose built matching engine, like that found within Circit’s Verified Analytics module, can bring further automation within reach.  

The matching engine can use data direct from the bank alongside a client record upload and perform the ledger matching automatically. With some of the more high-level analytics, such as in our Verified Insights model, changes in cash can be tracked: high and low points, large and unusual transactions, all of which can be used within a risk assessment or going concern assessment throughout the course of an audit.

In conclusion: the barriers to implementing technology

That brings us to the second poll discussed in the webinar. The question asked was: “What is your biggest challenge to implementing technology for data collection?”.

To this, 36% of respondents voted for assessing ROI, 25% voted for client buy-in, 24% picked finding the right vendor and 15% said staff engagement.  

From this we can conclude that despite the increased appetite for Open Banking solutions, there are still (perceived?) hurdles standing in the way for some firms, perhaps unnecessarily so.  

After all, ROI will become clear from time saved on audit files and then invested in deeper analysis which clients will appreciate. Client buy-in is becoming easier as clients and audit teams alike turn to technology more readily. Finding the right vendor – or choosing to build infrastructure in-house – are both facilitated by the wide range of options available and the renewed and increasing trust and positivity towards technology. Finally, staff engagement: as both Greg and Bethany mentioned, teams will learn to embrace new technologies if they are proven to make processes easier. With the right training, this point is easily addressed.  

So, what is next? Forward looking firms embracing new technological possibilities find themselves in the perfect position: options to choose from, examples from other firms having successfully embraced these changes and a lot of knowledge sharing available to guide them.

Want to know more?

If you are interested in Circit’s solution for collecting bank data, visit our Verified Transactions page.  

If you are interested in how you can leverage Circit’s matching engine to automate your ledger matching, you can find more information here or book a demo to see it in action.

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