Data: an enabler of more efficient and effective auditing
With its objective of making Europe fit for the digital age, the European Commission wants to put the EU and its Member States at the forefront of digitalisation. This includes promoting the availability of data from both public and private sectors. Maria Rosaria Coduti and Julie Sors work in the Data Policy and Innovation Unit of DG CNECT at the European Commission. They can see great potential for auditors to benefit from the ongoing transformation to create a common European data space, with access and re-use of the multiple data flows, both as users and providers of data. The two experts zoom in on the EU’s data strategy and the possible gains for auditors.
By Maria Rosaria Coduti and Julie Sors, Directorate-General Communications Networks, Content and Technology (DG CNECT), European Commission
Data as a key resource for auditors
Artificial intelligence, the Internet of Things, sensors, connectivity, industry 4.0. These words have entered our everyday vocabulary and exemplify the world we live in. Data is the foundation of all of these. It is the enabler of the digital transformation that is pervading every aspect of our lives, from the management of traffic flows in cities and improved use of natural resources in farms, to more efficient factories and better diagnoses and clinical decisions in hospitals. Data enhances the ability of stakeholders to innovate, create job opportunities, boost growth and competitiveness, deliver services to citizens and make their actions sustainable for the well-being of individuals and our planet.
Data is being generated and collected all around us at every moment; for example, geographical information, statistics, weather data, research data, transport data, energy consumption data or health data. The increasing capacity to make sense of ‘big data,’ thanks to the advance of data analytics and management tools, is leading to technological innovation and the development of new services and products.
For example, high-resolution satellite data from Copernicus Sentinel satellites allows for the real-time monitoring of natural water resources to prevent drought or pollution. Such data brings considerable benefits to public authorities, researchers and private companies in terms of providing innovative services.
Auditors need to embrace the digital revolution
The digital transformation is not leaving the world of auditing untouched. On the contrary, auditors are already beginning to embrace the digital revolution in order to execute their functions in the most efficient and effective way. The availability of non-traditional datasets, together with enhanced data analytics technologies, represents a great opportunity for auditors in fulfilling their duties. For example, auditors can now more easily combine datasets to analyse a particular phenomenon, e.g. performance of farmers across different countries at the same time. In doing so, they can better identify weaknesses, inefficiencies and trends in order to make recommendations to auditees.
Audit processes should continue to harness the latest technological developments in data analytics, machine learning and artificial intelligence, to allow auditors to perform their financial, compliance and performance audits in a faster and more innovative way, drawing conclusions that would have been impossible to reach via traditional statistical sampling. By automating data collection and processing, these tools could spare auditors from time-consuming manual data collection and analyses, thus allowing them to focus more directly on the analysis of insights to identify potential risks and fraud cases more easily. Finally, digital auditing — using digital means available to arrive at an audit opinion — is set to improve the transparency and accountability of public authorities towards the citizens they serve.
To gain maximum benefit from the digitisation of auditing in the near future, it is crucial that auditors are equipped with the digital skills and capabilities needed to use the new technologies available.
Auditors as producers of data
Auditors — from both supreme audit institutions (SAIs) and the private sector — are not only users and beneficiaries of the vast quantities of data produced every day, but also produce data themselves. Such data, along with other public sector data, can be extremely relevant not only for boosting the economy and developing more sustainable and efficient products and services, but also for developing more evidence-based decision-making and helping policymakers understand which priority areas to focus on. The insights from auditing procedures are a valuable resource for public authorities to perform ex ante or ex post evaluations of different types of interventions, e.g. legislative interventions or financial support, to mention but a couple. The need for SAIs to make more data available is therefore clear. The ECA, for example, has published eight datasets on the EU Open Data Portal , which gives access to open data published by EU institutions and bodies. All the data stored in the Portal’s catalogue is free to use for commercial or non-commercial purposes . The ECA has released the annual reports on the implementation of the EU budget from 2010 to 2017. The opinions that the ECA gives on the extent to which the annual accounts are reliable, and on whether income and spending transactions comply with the applicable rules and regulations, are important to demonstrate to EU citizens that the European Commission and EU Member States spend the EU budget — to which citizens contribute through taxes — properly and responsibly. In turn, the Commission obtains useful information to evaluate its action and better plan for the following years. This illustrates that if more data from auditing activities were made available, stakeholders could benefit from such guidance. By making more of its data available on the Portal, the ECA could help contribute to this objective.
EU data strategy
The European Union is at the forefront in terms of promoting the availability of data from both public and private sectors — for access and re-use — in order to benefit the economy and society, and foster the uptake of artificial intelligence and other data technologies. The ultimate aim of the EU’s strategy is to create a common European data space — a seamless digital area with the scale to enable the development of new products and services based on data — as a building block of the digital single market.
Under the data economy strategy, the European Commission has developed several strands in order to make at least some data flow more easily in the economy. Its April 2018 Communication ‘Towards a common European data space’ sought to address the re-usability of data from different sources in a holistic way. Its main legislative element is the revision of the Directive on the re-use of public sector information (PSI Directive). This new Open Data Directive significantly improves the availability, usability and socioeconomic impact of public sector information in the EU. In particular, by enabling an EU-wide release of high-value datasets, such as geospatial, meteorological, statistical and mobility data, the new rules will be instrumental in the development of artificial intelligence solutions by SMEs and start-ups. These high-value datasets will be made available for free, in a machine-readable format and via application-programming interfaces.
As part of the data package, the ‘Recommendation on access to and preservation of scientific information’ was also updated to improve the availability of data generated in the context of publicly funded research. Finally, a guidance document on sharing private sector data, which also contains a number of key data-sharing principles, is expected to help break down data silos and create fair markets enabling smaller actors to innovate.
The increased availability of open data will benefit auditors. It will provide them with more data that they can use in their audit processes.
Access to private sector data benefits auditing
In the era of the data revolution, it is not only the public sector but also the private sector that produces and collects huge quantities of data. Such data represents a key resource for public authorities to address public interests. For this reason, the Commission is currently focusing on facilitating, in certain circumstances, access to private sector data in both business-to-business (B2B) and business-to-government (B2G) contexts.
In this context, an expert group was set up in October 2018 to formulate a set of recommendations on future policy or legal measures to take forward the EU’s policy on B2G data sharing for public interest purposes. Access to private sector data is relevant for both public and private auditors because, for example, it can facilitate a better understanding of European economic behaviour. The expert group will finalise its report by the end of 2019.
What is next?
Data and digitisation are key priorities for the new Commission. In the political guidelines for the 2019–2024 Commission, President von der Leyen stated that ‘data and AI are the ingredients for innovation that can help us to find solutions to societal challenges’ and that ‘the public sector has an important role in stimulating digital transformation’. Auditors, as producers and users of data, can contribute to this goal while benefiting from the data revolution.
This article was first published on the 1/2020 issue of the ECA Journal. The contents of the interviews and the articles are the sole responsibility of the interviewees and authors and do not necessarily reflect the opinion of the European Court of Auditors.
