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At the Rutgers Business School 38th World Continuous Auditing and Reporting Symposium  on November 4^th & 5^th 2016 on the Rutgers campus in Newark, NJ.; a panel discussed the Rutgers AICPA Data Analytics Research Initiative (RADAR).  The three components of the project are:

1. “Multi-dimensional audit data (MADS): This project will propose an outlier prioritization methodology to identify a sample that is more likely to be problematic in performing substantive tests of details.” The goal is to develop methods to identify and remove high risk transactions from the population, subject these to detailed testing, and develop a framework to justify reduced scrutiny/testing of the remaining population which has a much lower risk of error/non-compliance.
2. “Sandbox Project: The sandbox project proposes to look at a range of audit analytics including:
   1. Process mining,
   2. Text mining,
   3. Continuous control monitoring, and
   4. Risk-based prioritization of controls to be tested.”
3. “Visualization: This project will address the understanding of the basic axioms of visualization in the audit process as well as its integration with audit analytic methods.”

The panel discussed using visualization to identify outliers such as journal entries posted after 9 PM, or of a certain dollar amount, or posted by certain individuals.  They discussed defining the critical path of transactions and using audit analytics to identify transactions that are outliers to this critical path.  Also, they discussed applying analytical tools to ERP activity logs to identify unusual transaction for testing.  The overall goal is to improve the efficiency and effectiveness of the audit process.  They emphasized that a new framework resulting from this process must replace current methods rather than adding additional audit testing to the current process.  All panel members agreed that the current audit process is lengthy, expensive and in need of improvements but new methods will only gain acceptance if they reduce effort and cost.

This process will likely take years to arrive at new auditing standards that are supported by all parties, including the SEC and PCAOB, but all were encouraged that the process in underway under the leadership of the AICPA with support of the major audit firms.  Patience is required but progress is underway.