Data Mining for Auditing Essay Example | Topics and Well Written Essays - 2000 words

Data Mining for Auditing - Essay Example in time, with increase use of selective informationbases, comes a new ch solelyenge how to make sense of the abundant data Auditors are overwhelmed with enormous collection of data. Omnipresent personal computers, low cost multi-gigabyte disks, ubiquitous electronics and new generation database languages have do it real simple for companies to capture data and save it without any worries of loss of space, time or calculate power. This benefit of databases to companies is also the bane to auditors. However, the effective utilisation of one robust engine room will impart sense to the chaos generated by databases Data Mining.Data Mining aims at converting data to sensible information. It intends to take away information from the data repositories in a manner as needed by the auditor. The auditors, with the help of data mining techniques can mine for the relevant information needed to perform their assessment without having to bother about the digressive data.This report aims at analysing the benefits brought about by applying data mining technologies to auditing. As a part of the cultivate of analysing the benefits, the paper also presents the technological overview of data mining, the problem faced by auditors and the tools and techniques data mining provides to ameliorate the problems. Auditing An Introduction to the Problem DomainAuditing is commonly defined as the process of accumulating and analysing information to detect the point of conformance of the information with the pre-set criteria (Arens & Loebbecke, 2000). During its inception, auditing was an activity performed only to check financial compliance with the goals set. However today, it is an activity that is carried stringently across all the domains of an enterprise. Auditing involves analysing the information from all departments including manufacturing, operations, human resource, finance and other verticals. Generally, companies hire independe nt auditors from distant the company to ascertain whether the statements of the company are in conformity with the generally accepted accounting principles (GAAP). However auditing is facing very tough challenges. The demise of major companies such as Enron and Anderson are live examples to delimit the depth of negative impact that can be brought about by improper auditing. The complexity of condescension transactions coupled with investors complex business practises to gain more profits makes the job of an auditor very challenging (Vijayalakshmi, 2003). To ensure that an objective assessment is reached, an auditor must be presented with data at all levels. The company creates huge databases of statements, records and other data that an auditor is expected to analyse. However due to timing and cost constraints, auditors can not examine every detail behind the stacks of records. With massive improvements in technology such as the development of Supply Chain Management Systems and Enterprise Resource Planning applications, the substance of business transactions performed everyday has grown exponentially. Since, in most cases, a company hires an