Moving Beyond AP and Payroll with Data Analytics2nd Annual I     Audit ConferenceFebruary 24 2016

How Most Audit Teams use Data Analytics…

Accounts PayablePayrollGeneral LedgerAccounts PayablePayrollGeneral LedgerAccounts PayablePayrollGeneral LedgerAccounts PayablePayrollGeneral LedgerAccounts PayablePayroll

How Audit Teams Want to Use Data Analytics…

Automation!!!

Mergers&

AcquisitionsFRAUD

Reports

Operations

Risk Assessments

Data Superheroes

Uses in IT Auditing…

Active Directory• Analyze active directory group membership changes• Analyze folder permissions by active directory groups•    Identify inactive active directory accounts• Monitor changes to high risk groups such as Domain 

Admin• Compare with HR data to identify users with 

inappropriate permissionsApplication Security• Compare HR data termination date with last login 

date by user account• Identify stale accounts by last login date over a 

specified threshold• Identify patters of failed login attempts to high risk 

users (Admin, CFO, AP Manager)

Use Data Analytics for Mergers and Acquisitions…

Mergers & Acquisitions

• Company “rules”• Accounting principals• Compliance and regulatory requirements

• SOX requirements

8%  vs.  

34.5%Bad Debt

Automate monitoring…

Monitoring COBIT 4.1

DS 5.5 ‐ Security Testing, Surveillance and Monitoring

Example Control Objectives:• Servers are monitored• IT monitors servers• Server violations are investigated

Risk Assessments…Monthly!

Monthly Risk Assessment

• Risk Red Flags• Transactional Attributes• Fraud Red Flags• Trends & Patterns• Budget to Actual

Monthly Risk AssessmentData Scorecard• Monthly risk scorecard for all retail locations• Outliers – outside of established parameters in RED

Visualization can help you…

Why Visualization?

65% % of the population that are visual learners

% of information processed by the brain that is visual.

60,000 X How much faster thebrain processes visual information than text

90%

Visualization Will Help YouCommunicate Success

 $‐  $1,000.00  $2,000.00  $3,000.00  $4,000.00  $5,000.00  $6,000.00  $7,000.00

Hotline

Employee Complaint

Customer Complaint

Inventory

IDEA

Average Cost Per Fraud

Fraud $ By Identification Tool

0

2

4

6

03/14 04/14 05/14 06/14 07/14 08/14 09/14 10/14 11/14 12/14 01/15 02/15

# of Terminations

Visualization Can Make the Complex…Country Favorable Unfavorable Undecided or neutral

Argentina 36% 44% 20%Bangladesh 76% 22% 2%

Brazil 65% 27% 8%Chile 72% 19% 9%China 50% 43% 7%

Colombia 64% 22% 14%Egypt 10% 85% 5%

El Salvador 80% 15% 5%France 75% 25% 0%

Germany 51% 47% 2%Ghana 77% 9% 14%Greece 34% 63% 3%India 55% 16% 29%

Indonesia 59% 33% 8%Israel 84% 16% 0%Italy 78% 18% 4%Japan 66% 30% 4%Jordan 12% 85% 3%Kenya 80% 12% 8%

~http://www.perceptualedge.com/example8.php

Simple and… Instantly Understood

ARGENTINA

BANGLADESH

BRAZIL

CHILE

CHINA

COLOMBIA

EGYPT

EL   SALVADOR

FRANCE

GERMANY

GHANA

GREECE

INDIA

INDONESIA

ISRAEL

ITALY

JAPAN

JORDAN

KENYA

GLOBAL VIEW OF USFavorable Unfavorable Undecided or neutral

How about for…

SOX Testing 

• Repetitive use scripts• Significant reduction in testing time• 100% population for year‐end and/or interim testing• Automation of SOX Testing including integration of analytics testing and workpapers

And who doesn’t want that?

SOX Testing to Automate

IT• Terminated Users• Segregation of Duties (SOD)• Backups / Recovery• Physical Access• Database Access• Security Monitoring• Help Desk Tickets

Operational• Non‐Standard Journal Entries• Account Reconciliation• A/R• A/P• Payroll• Accounting Close Process

Fight Fraud…

3 Fraud Examples

• Incentives Fraud (coupons)• Off Hours Transactions• Financial Statement Manipulation

Incentive Fraud

• Incentive programs can create both 

Rationalization

Incentive Fraud

Fraud

• $25 Coupon• $30k in fraud in 3 weeks• 33 people terminated

Data Analytic Detection

• Excessive voids• Excessive re‐rings• Time per transaction

Off Hours Transactions

• Transactions occurring before or after normal working hours.• Unusual times and/or days.• Retail – store hours• GL transactions• …even expenses

Financial Statement Manipulation

• Company subsidiary ‐ operated like a startup• Declining business • Significant financial incentives for meeting targets• Loans were “rolled forward” to make them appear current

• Resulting in the appearance of • healthy loan balance • significantly lower bad debt

And…

• Anti‐money Laundering (AML)• Foreign Corrupt Practices Act (FCPA)• Inventory • Ratios for Financial Statements• Continuous Fraud Auditing

Thank You

Keith BarberDirector, Business Analytics Insight(877) 332‐8708kbarber@empoweraudit.comhttp://www.empoweraudit.com/