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Financial Accounting Advisory Services Advanced process assurance and data analytics May 2013
Page 2 Advanced process assurance and data analytics
Agenda
About EY 3
Advanced process assurance and data analytics 6
Appendix 16
Credentials 18
Contacts 19
Page 3 Advanced process assurance and data analytics
About EY
Page 4 Advanced process assurance and data analytics
EMEIA Sub-areas
EY Global
Countries worldwide
140
Employees worldwide
167,000
US$ revenue (2011-12)
24.4b
Africa Angola, Botswana, Republic of Congo, Equatorial Guinea, Ethiopia, Gabon, Ghana, Guinea, Ivory Coast, Kenya, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Nigeria, Rwanda, Senegal, Seychelles, South Africa, Tanzania, Uganda, Zambia, Zimbabwe
Belgium and Netherlands
Germany, Switzerland and Austria
Commonwealth of Independent States Azerbaijan, Belarus, Georgia, Kazakhstan, Russia, Ukraine, Uzbekistan
Central and Southeast Europe Albania, Bulgaria, Croatia, Cyprus, Czech Republic, Estonia, Greece, Hungary, Latvia, Lithuania, FYR of Macedonia, Malta, Moldova, Poland, Romania, Serbia, Slovakia, Slovenia, Turkey
France, Maghreb and Luxembourg France, Luxembourg, Algeria, Morocco, Tunisia
Financial Services Organizations Belgium, Channel Islands, France, Germany, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Switzerland, UK
India
London
Mediterranean Italy, Portugal, Spain
Middle East and North Africa Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Oman, Pakistan, Palestinian Authority, Qatar, Saudi Arabia, Syria, United Arab Emirates
Nordics Denmark, Finland, Norway, Iceland, Sweden
UK and Ireland UK, Isle of Man, Republic of Ireland
Page 5 Advanced process assurance and data analytics
Using automation and analytics to transform financial process assurance
Page 6 Advanced process assurance and data analytics
Key questions for stakeholders
Top-performing companies leverage data analytics to guide future strategies and daily operations more often than low performers.
How to reach the next stage of reliable management oversight
Assurance liability
productivity Internal audit
Departments
Management
Information technology
Board
Efficient process
monitoring?
Does anyone want more
data?
Fraud within the
organization?
Degree of assurance?
Effective controls!
What’s next?
Page 7 Advanced process assurance and data analytics
Client issues and value proposition
Advanced process assurance and data analytics helps clients to use their existing data to increase process assurance, while reducing costs and ensuring effective monitoring.
Insufficient process assurance
► Internal monitoring functions (e.g., internal audit) are not able to cover all relevant internal processes.
► Uncertainty of clients about findings or control testing results as part of financial statement audit.
Inefficient control methods and increasing cost pressure
► Only random testing of controls and processes are possible, due to lack of resources.
► Full, company-wide process level controls are not feasible, due to cost.
Limited added value from available data
► Fragmented IT infrastructure is generating a variety of data, which is only partially used for analysis.
► Amount and complexity of internal processes or IT systems is increasing. ► Process weaknesses are detected unsystematically.
Minimize liability threat of boards
► Unsystematic or basic monitoring of effectiveness through boards. ► Inefficient data-collection process for monitoring tasks by management
or boards.
Enhanced process assurance
Efficient controls
Value-added data
Effective monitoring
Page 8 Advanced process assurance and data analytics
Framework and client benefits
► Advanced process assurance and data analytics is embedded into the corporate governance of an organization. Our framework contains four key steps.
Business processes
Board
Advanced process
assurance and data analytics
Company culture
Company structure Management
Optimizing control and analysis procedures for essential and
critical processes
Increasing process assurance and less findings
Considering large transaction and data volumes
for process monitoring
Added value by using existing data
1
2
Establishing real-time reporting for control processes
Continuous monitoring of effectiveness
Automation of control methods and usage of advanced data
analytics
Efficient control methods and cost reduction
4
3
Page 9 Advanced process assurance and data analytics
Solution elements
► We are able to tailor our solution to every stage of your control environment maturity. The optimization of individual controls, in combination with an overall streamlining of the control portfolio through data analytics, will provide the maximum additional value.
Advanced process assurance and data analytics
Advanced process assurance Data analytics
► Optimize single controls ► Analyze critical processes and transactions ► Automate manually performed control activities ► Establish IT-enabled findings-workflow ► Implement dashboards for process monitoring and
reporting
► Analyze portfolio of controls ► Optimize company level controls ► Develop non-trivial expectation space ► Ongoing data collection and execution of control
portfolio ► Sophisticated controls analysis and reporting
Offe
ring
Exa
mpl
es ► Avoid duplicate payments
► Minimize purchase process irregularities ► Improve customer terms and conditions control ► Avoid shortage or overrun of IT licenses
► Run expectation space and controls portfolio on: ► Revenues, trade receivables and inventories over
time, products and segments, interest, trading, commission-income over time, financial instruments and segments
Page 10 Advanced process assurance and data analytics
Advanced process assurance – maturity levels
► APA increases the efficiency of controls and enhances the reliability of processes. Thus, it improves the effectiveness of the entire internal control system
► A key component of APA is the predominant automation of underlying control activities
► Therefore, structured data from different IT systems are combined via a rule set
► APA is not an IT system, it is a methodology that is applicable to all available, structured company data
Sustainable automation of controls
Workflow-based control and process monitoring
Monitoring of effectiveness via dashboard
Leverage for ad hoc issue analysis
Usable for continuous (internal) auditing
► Increasing process assurance
► Cost reduction for issue management
► Efficient control performance
► Increasing efficiency of controls and process monitoring
► Transparency and effectiveness of controls and processes
► Continuous monitoring of effectiveness
► Facilitate performance of financial statement audit
Optimized control performance and monitoring
Streamlined process monitoring and oversight
Simplified information access
Advanced process assurance (APA)
Efficiency
Maturity levels
Page 11 Advanced process assurance and data analytics
Data analytics – concept
Expectation space calculator
► Calculates expected values in different dimensions: ► P&L and financial statement positions, product, value,
time, etc.
Current data calculator
► Collects the actual data in the defined dimensions and calculates the respective measures
► Calculation of the time-expectation graph:
► Calculation of the time-performance graph:
Control portfolio analyzer
► Compare the time-expectation graph with the time-performance graph via pattern matching and stochastic methods ► Covariance matrices, Bayesian networks, neural networks,
artificial intelligence and regression analysis
Revenues
Val
ue
Time
Receivables
Val
ue
Time
Inventories
Val
ue
Time
Revenues
Val
ue
Time
Receivables
Val
ue
Time
Inventories
Val
ue
Time
Moment
Val
ue
Balance sheet item
Moment
Val
ue
Balance sheet item
Dat
a co
llect
or
Moment V
alue
Balance sheet item
Page 12 Advanced process assurance and data analytics
Project approach
► Our advanced process assurance and data analytics project approach is designed to support your business case, streamline process monitoring and simplify management oversight.
The “diagnose” and “design” phase of the project approach are critical to the success of advanced process assurance and data analytics.
Identify Diagnose Design Deliver Sustain
Scope As-is analysis Data model and testing Roll out Recurring
operation
Project objective
Analytics scope
Risk and process
Methods and options
Automa- tion and analytics
Workflow
Reporting Technical rollout
Training and awareness
Technical support
Continuous improvement
Project management
Change management
Page 13 Advanced process assurance and data analytics
Key project steps, tools and enablers
Diagnose phase
As-is analysis
Risk and process Methods and options
Conducting process and risk analysis Analyzing methods and automation opportunities
► Workshop with key stakeholders, experts and departments to discuss current state of process risk and future state vision
► Interviews with identified experts to gain perspective and profile of existing control environment, analytic methods and first analysis of optimization and automation potentials
Page 14 Advanced process assurance and data analytics
Key project steps, tools and enablers (contd)
Design phase
Data model and testing
Automation and analytics Workflow
Developing methods for advanced analytics and control automation
Designing monitoring workflow
► Design advanced rule set for control automation
► Design advanced data analytics for a whole control portfolio
► Design continuous monitoring workflow on applied control automation and portfolio and data analytics at functional level
Reporting
Designing and developing reporting and dashboard
► Design and development of reporting structures and dashboard for relevant stakeholders
Page 15 Advanced process assurance and data analytics
Pre-project dialogue
Quick scan ► Exposure of process issues and transaction failures: which tracking methods are in place? ► Organization of process oversight: how, and to what extent, is information provided to management? ► Overload of data: does the data provided enable fast monitoring of processes? ► Resource allocation for control purposes: are suitable capacities for process oversight available? ► Control portfolio: is the interconnection of individual controls considered while assessing effectiveness? ► Efficiency of controls: are there a large number of manual control activities? ► Control methods: are applied methods state of the art?
Strategic road map ► Analyze options for the client business case ► Align expectation of and benefit for key stakeholders ► Collect specific data and individual client metrics ► Discuss business case with the client ► Develop overall potential with the client ► Create control portfolio and benefit roadmap
Look and feel ► Discuss options for implementation and results, e.g.,:
► Control automation and data analytics examples ► Multiple-user showcase based on a sample corporation ► Demonstration of possible advanced process
assurance and data analytics workflow ► Conclude with client on specific feasibility
Business case workshop
Showcase
What needs to be considered?
What are the benefits?
What does it look like?
Appendix
Page 17 Advanced process assurance and data analytics
Credentials
Client Country Sector or industry Service description
Non-listed financial institute
Germany Banking and capital markets
EY supported the accounting department of the client during the implementation of an integrated internal controls system, including advanced control methods. Therefore, different processes were analyzed, and a functional and consistent model was defined. EY supported all stages of the implementation project, starting with as-is analysis, definitions up to test planning and test conduction.
Listed oil and gas operations company
United Kingdom
Oil and gas operations
EY supported the client with the analysis and identification of control deficiencies within a full population of transactions. Analytical tests and procedures were performed to identify exceptions. We helped the client to establish follow-up activities. EY also designed and developed a reporting for the observed findings.
Listed automotive and industrial engineering company
Germany Automotive EY supported the implementation of IT controls (definition, description and coaching), the development of a controls manual and the specification catalogue for automated controls monitoring.
Page 18 Advanced process assurance and data analytics
Financial Accounting Advisory Services contacts – EMEIA
Dr. Detmar Ordemann Partner [email protected] + 49 711 9881 15438
Marc Grötzner Executive Director [email protected] + 49 211 9352 16279
EY | Assurance | Tax | Transactions | Advisory About EY
EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. © 2013 EYGM Limited. All Rights Reserved. EYG no. AU1785
EMEIA Marketing Agency 1000307 ED None This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice. ey.com