Statistics are often used in the business world to help management make decisions quickly and accurately. The data generated from statistical analysis is also of value to auditors during the audit process. To understand the value of statistics, let’s start by looking at the basics.
In simple terms, statistics are numerical information that has been presented in quantitative terms. The data tends to relate to a particular area of interest or a problem situation. Statistics derive as a result of measuring, counting, or observing. The resulting data refers to those aspects of a problem situation that can be measured, quantified, counted, or classified.
Businesses collate a huge amount of statistical data across their operations. Main business functions that use statistics include:
- Operational planning: This can relate to special projects or recurring activities over a particular period of time.
- Creating standards: These can relate to aspects such as the size of employment, sales volume, and everyday norms for products or output.
- Control: This includes comparing the actual production achieved against what has been targeted.
Statistics are also readily available in relation to customer satisfaction, product or production nonconformances, on-time delivery, staff attendance, occupational health and safety incidents, and corrective action requests, and are generally presented as part of management reviews or production meetings.
This is all valuable information, not only from a business perspective, but also from that of an auditor coming in to audit the business.
Statistics provide auditors with an unbiased method of analyzing processes and business functions. Not only does this help uncover issues relating to performance and efficiency, but it also removes bias and emotion from the audit process. This helps auditor have much more meaningful conversations with auditees and management.
An example of a situation where statistics may have to be reviewed is when auditing manufacturing lines. Here, the statistical process control (SPC) method is commonly applied. SPC describes a method of quality control that uses statistical methods and is applied to monitor and control a process to ensure that it operates at its full potential. At full potential, the process can make as much conforming product as possible with minimal waste. SPC can be applied to any process where the “conforming product” output can be measured.
Interested in learning more about statistics in auditing? Exemplar Global College offers an easy-to-follow course that can guide you through the fundamental concepts you need to get started with statistics. Click here to learn more.