Data feeds are a divisive topic among SMSF auditors.
A data feed is an automated process of receiving data from a data source. Using data feeds can save an auditor a great deal of time and effort. It also reduces the administrator’s workload.
The upsides are obvious. Relying on data feeds lets you go over more information, which can result in more comprehensive audits. The feeds also reduce the time needed to perform your analyses.
This is a competitive industry, and auditors need every advantage they can get. Hence, it’s important to make your audits as efficient as possible.
However, many auditors dislike using data feeds. They do not trust the accuracy of these feeds. Many believe that the electronic delivery process is not secure enough. There’s also a possibility that processing and technological errors may occur. This has an impact on the integrity of the data.
All of these concerns have merit. But you should consider the facts before you discard data feeds from your auditing process altogether.
It’s crucial to recognize that there are different kinds of data feeds. Some of these are poorly rated, but others can be extremely useful and trustworthy. Once you know what to look for, it isn’t particularly hard to tell the difference.
While they’re changing the face of the industry, data feeds are still a mystery to some auditors.
But with the introduction of Transfer Balance Account Reports (TBARs), data feeds will be increasingly used to provide up-to-date data. This means more auditors will need to consider how data feeds can be incorporated into their processes.
So, how do you know where to place your trust? Let’s look into the differences in different data feeds.
Using data feeds simply means getting your data electronically transferred from the source. Each institution (e.g. bank, broker, or wrap) has its own data feed setup. The quality of these sources varies.
Here are a few factors you should take into consideration:
Some sources have trustworthy and robust feeds. But always look into the data source before you decide how much to trust your feeds.
The two types of data feeds are as follows:
When a direct-connect feed is set up, the data comes directly from the source. This happens via an encrypted link. There are no third parties involved in this process.
Since direct-connect feeds are purpose-designed, the format of your data should suit your needs. These feeds are authenticated, so you can be sure the source is valid. Additionally, you can monitor and track these feeds on your own schedule.
Direct-connect feeds can automatically process income entitlements. Instant tax statements can even be set up for some of the institutions your clients are working with. With direct-connect feeds, you can also see historical transactions.
If you’re worried about consistency, direct-connect feeds have you covered. The process is automated and while errors might pop up on occasion, it’s unlikely data will stop arriving altogether as it can’t be intercepted or altered.
This is the more affordable alternative for providers. However, scraping feeds aren’t as reliable as direct-connect feeds.
Here is how scraping feeds work: the source sends emails to a third-party intermediary. The intermediaries are data aggregation services which prepare a feed based on the emailed data. This process is called scraping.
The scraped data can be sourced from the body of the email. It can also come from the attached PDFs. In either case, errors can happen. For example, the computers may not be able to read the data formatting in the PDFs.
How do errors get resolved? The intermediary has to repair them manually.
So while the scraping itself is automated, there can be delays. There is also a real chance of data loss. It’s also easy to see how this can compromise the security of the data.
You also don’t have authentication in place when your data feed uses scraping. There’s a chance the initial data came from a false source.
Additionally, consider the risk of interception. When this happens, there’s no guarantee that you’ll notice the data is compromised.
As an auditor, you require first-hand confirmation. Second-hand data cannot typically be relied upon.
Some data feeds come with certification based on the Auditing and Assurance Standards. The ASAE 3402 (Assurance Reports on Controls at a Service Organisation) certification helps auditors to place reliance on the feeds based on the assessment of the design and effectiveness of the controls in place.
A feed can only receive this certification if there are measures in place to minimise data errors. When errors do slip in, there are rectification steps you can rely on. The certification also helps auditors to understand how the data has been sourced and gain comfort that it was free from manual interception.
Once again, TBARs are changing the way SMSF administration and audit work is approached. TBARs require up-to-date accounting, and data feeds are a key part of that. Automating this process makes the accountants’ lives much easier.
If you’re an auditor, data feeds give you a more comprehensive access to data confirmation. But it’s very important to stay up-to-date with the various feeds.
Over the past few years, auditors have been under increasing fee pressure and it’s becoming very difficult to operate at these competitive prices and maintain a quality audit.
The only solution is to speed up the data confirmation process. Hence, you should make data feeds a part of your testing procedures. You can do this as part of a wider move towards automation that includes the use of data feeds in your testing procedures. In fact, this is key to operating successfully in this environment.
Always check whether the source of your data is verified. Make sure you have a clear idea of what happens to the data on its way to you. Remember that you don’t have control over what happens to the feed. Verification is a mark of trust that means you can rely on the feed.
With changing legislation, how to best incorporate data feeds and automation into the SMSF life cycle is becoming a key discussion topic. It’s an important area for both auditors and accountants. If you want to stay afloat, you cannot avoid making use of automation.
Incorporating data fees into the auditing process helps you to save huge amounts of time. Moreover, it can help you to identify issues that need further attention.
How else can you automate your work?
Cloudoffis can help you complete cost-effective and accurate SMSF audits. The platform lets you cut down on the time spent on your audit process by as much as 40%.
With Cloudoffis, you can download data directly to the platform from leading SMSF software such as Class and BGL.
Find out more about our cost-effective solutions, schedule a live demonstration with our team today on the form below.