Denver Ahead of the Curve in Using Technology to Support Audits
Published on June 23, 2022
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DENVER – Denver is a clear leader in innovative audit technology and techniques, according to a new special analysis from Denver Auditor Timothy M. O’Brien, CPA.
“Innovative audit analytics tools allow my office to identify potential issues sooner,” Auditor O’Brien said. “While a traditional audit could take months longer, audit analytics and continuous auditing can help speed up the work and support efforts to focus only on the highest risks.”
We surveyed more than 100 local government audit organizations across the country and we reviewed professional literature about audit analytics to assess the current state of audit analytics methods, tools, and applications to auditing. We hoped to identify areas where we could further enhance how we use analytics to improve our audit work.
“Audit analytics” means using automation and new technologies to assess entire datasets and thousands or pieces of information in less time and in more reliable ways than through traditional techniques like random sampling. Using audit analytics improves auditors’ confidence in their conclusions.
Auditor O’Brien launched the office’s audit analytics and continuous auditing program in 2017. One of his founding team members —Sam Gallaher, PhD, an audit analytics manager — conducted the recent survey. The Audit Analytics Team collaborates with our other audit staff to regularly work with large datasets and statistics.
The Audit Analytics Team first started with continuous auditing techniques to find outliers or conditions that could indicate a process or system is not working as it should. The first project focused on identifying city contracts that appeared to be designed to avoid City Council oversight — and the insights from that project allowed the team to hone its techniques and ensure even more reliable results.
Since then, the program has evolved to use automation, statistics software, and computer languages for more sophisticated analysis of the city’s operational risks.
A recent example of our successful use of audit analytics was how the analytics team worked with a performance audit team on the award-winning audit of parking shuttle services at Denver International Airport. Auditor O’Brien’s team used analytics techniques to assess data from the airport’s own software system and investigate the reliability of three years’ worth of shuttle services to uncover how routinely late the buses were.
In that audit, we found consistent delays over a three-year period affected potentially millions of people each year who rely on the free shuttle buses to catch their flights or to report to work on time. We then used those results to quantify the millions of dollars in potential penalties the airport failed to collect when the shuttle services contractor did not comply with contract requirements related to service reliability.
“Taking a close look at data in a comprehensive and forward-thinking way might sound like a lot of work,” Auditor O’Brien said. “But it actually helps speed up the audit process and allows us to truly impact people’s lives.”
The nationwide survey we did for this new special analysis shows the Auditor’s Office specifically excels in several areas including having dedicated audit analytics resources, applying analytics and continuous auditing for general risk assessment and annual planning, and reporting analytical results in a variety of ways.
Audit analytics is increasingly important and expected in both internal and external audit functions at private and public audit firms. As organizations move toward fully digitized financial and business processes, auditors must follow.
As noted in our analysis, there are many computer languages and software programs that auditors can use to analyze data or write scripts — commands that perform a series of tests — to automate the analysis of data. Our auditors have used the computer language Python and software like Arbutus and Tableau to process data.
Using these tools, auditors in Auditor O’Brien’s office can connect to additional data sources, automate advanced analyses, and visualize results. And auditors can have more confidence in the results of these techniques because these new tools can help clean up datasets, confirm the integrity of those datasets, and assess entire populations instead of only relying on sampling.
“Using secure methods to take in data and analyze it, we can do the best possible work for the people we serve,” Auditor O’Brien said. “Audit access is more important than ever to facilitate comprehensive analysis and prioritize the highest risks.”
We also identified several audit analytics ideas other local government audit organizations have considered, which we could use to expand our program further.
The results of innovative audit analytics work provide stronger conclusions based on rigorous and comprehensive assessments of city agencies’ digitized information in line with the auditing standards the Denver Charter requires us to follow. Agencies can then use our audit recommendations to make improvements. Findings and recommendations based on strong evidence and analysis are more likely to be implemented and create positive, lasting change for the city.
AUDITOR TIMOTHY O'BRIEN, CPA
Denver Auditor's Office
201 W. Colfax Ave. #705 Denver, CO 80202
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