Doing More with Less Your Untapped Resources

Doing More with Less Your Untapped Resources Paulette Keller, CPA, CIA Mike Jacka, CPA, CIA paulette.keller@farmersinsurance.com mike_jacka@farmersinsurance.com

Change happenz • Changing laws/regulations • Changing risk environment • Changing economic conditions Changing conditions often require us to do more with less.

Untapped resources Processes • Computer assisted audit techniques (CAATs) • Continuous Assurance Partnerships • Integrated Assurance People • Creativity

CAATs • CAATs: is a growing field within the audit profession. In the broadest sense CAATs the practice of using computers to automate or simplify the audit process. In practice, however, CAATs has become synonymous with incorporating data analytics into the audit process.

Why CAATs • PAST • Manual and computerized business processes • The traditional auditing model – periodic reviews of static information. • PRESENT • Nearly all business information is digitized. • Manual review is, at best, inefficient and at worst, not possible. • Demands to do more with less

Data analysis using CAAT • Risk Assessment – examination of key performance metrics or key risk indicators to determine if the risk profile of a particular function has changed. For a finance function you might look at the following. • Cash balance compared to plan and prior period • Cash transactions that exceed authority limit • Significant differences identified between planned and actual taxes • Significant unexplained financial fluctuations • Fraud detection – examine data for potential fraud indicators. • Vendor/Employee/Agent address comparison • Vendor SSN/EIN validation • Employee name/Payee comparison • Benford analysis (expected frequency) • Ratio analysis • Supplemental payments under authority

Data analysis (continued) • Control evaluation – tests of specific controls to determine if they are working as intended. • Access control to a particular system • Payments over authority limits • Appropriate approvals of transactions • Review of entries that may indicate a management override of controls • Split purchase orders • Recovery opportunities • Duplicate payments • Travel expense irregularities

Continuous Assurance “To remain relevant….internal auditors need to move beyond a static, cyclical audit approach and adopt a continuous, comprehensive approach to audit and risk assessment – one that optimizes the use of technology. The ability to identify and analyze emerging risks and trends, and to conduct audits on a more targeted basis in response to specific risk concerns will be essential.” 2012 Survey PwC • Continuous Auditing • Method used to perform audit-related activities on a continuous basis – includes control and risk assessment • Performed by Internal Audit • Continuous Monitoring • Processes to ensure policies/processes are operating effectively and to assess adequacy/effectiveness of controls • Performed by operational/financial management; audit independently evaluates adequacy of management activities • Continuous Assurance • Combination of continuous auditing and audit oversight of continuous monitoring Source IIA GTAG3

Continuous Assurance Benefits • Increased scope of audit activities • Increased ability to mitigate risk • Reduced cost of internal control assessment • Increased confidence in financial results • Improvements to financial operations • Reduced financial errors and potential for fraud • Reduced revenue leakage for improved bottom-line results • Sustainable and cost-effective means to support compliance Source IIA GTAG3

Integrated Assurance Many organizations have several groups that contribute to providing assurance that the risk and control framework is operating as intended. Most of these groups work in isolation

Why integrated assurance? • Duplication of effort is costly • Lack of coordination causes unnecessary disruption in business activity • Providers working in silo may not see the big picture

Integrated Assurance Challenges • Lack of common platforms • Reluctance to share information • Different objectives • Different competencies

Integrated Assurance Benefits • Consolidated view on Issues/Risks • Enhanced quality of reports • Comparability • Focus on critical issues • Plan gaps & overlaps addressed • Easier & Better Management Of Risks & Issues

Creativity

Doing More with Less Your Untapped Resources