​ ATA ANALYTICS AND AUDIT

D
COVERAGE GUIDE
TABLE OF CONTENTS

03 Data Analytics and Audit 17 Audit Software

Coverage Guide: Sample 1 18 Data Analysis Methodology
04 What Is Data? 19 What Can I Do With This Stuff?
05 Data Becomes Information for 20 Where Are We Heading?
Reporting 21 Data Analytics and Audit
06 Reports With Data Analysis Are Coverage Guide: Sample 2
Designed 22 Setting the Stage: Data Analysis
07 Defining Data Analysis Defined
08 Getting Your Data 23 What Is Data?
09 Where the Data Came From 24 Data Becomes Reports
10 Data Outputs 25 You Design Reports With Data
11 Choosing the Right Data Analysis Analysis
Software 26 The Six Elements of Infrastructure
12 Internal Auditing Strategic 27 Critical Success Factors and
Objectives Common Pitfalls
13 Provider and Implementer Support 33 How Do We Use This and What
14 Technical Features and Are Some Good Examples?
Functionality
2
15 Cost
DATA ANALYTICS AND AUDIT COVERAGE
GUIDE: SAMPLE 1
DATA BECOMES INFORMATION FOR REPORTING

Data File Inventory Report

Unit Extended
Quantity Warehouse Part Description Quantity
Cost Cost

Part 1 XX XX XX XX XXX
Number Client
Application
1 XX XX XX XX XXX
Program
Unit Cost 4 XX XX XX XX XXX

4 XX XX XX XX XXX
Warehouse
Number 10 XX XX XX XX XXX

10 XX XX XX XX XXX

4
WHAT IS DATA?
Data is any piece of information stored on a computer. That information may be a customer number, part number, unit cost, street name, zip code or
invoice date. If it is information stored on a computer, it is data.

Name 1. 11. Transaction Type

Division 2. 10. Quantity

Sales Amount Customer Number

3. 9.

Employee ID 4. 8. Price

Transaction Date 5. 7. General Ledger (GL) Account

Username 6.

5
REPORTS WITH DATA ANALYSIS ARE DESIGNED
With data analysis techniques, you are now free from having to use whatever the client produces. You can generate reports specific to the audit needs
focusing on the items of interest or risk.

Data File(s) Summarized by Part

Number

Quantity

Extensions and Footings

Verified
Part Number Data Analysis
Techniques

Unit Cost
Excess Inventory

Warehouse
Number
Unusual Items
Customer Name Customer ID

6
DEFINING DATA ANALYSIS

Data analysis systematically applies statistical and logical techniques to describe, summarize and compare data to identify
business issues in historical data (e.g., AP file – look at how quickly a client is paying invoices).
Data mining is different. At the same time, data analysis is generally analyzing historical information to find anomalies. Data
mining omits the anomalies to search for trends and patterns that predict future behavior. Data mining is more statistical and
is used to predict the characteristics of a credit card applicant who is unlikely to pay their bills.
Data mining can be described as identifying patterns and relationships in data and deciphering that information to make
useful business decisions.
The extraction of data from a company’s information system to perform data selection, classification, ordering, filtering,
translation and other functions to provide meaningful information about business processes.

7
GETTING YOUR DATA

How is the data What system changes What are the field’s
How is the data collected?
consolidated? have happened recently? restrictions?

8
WHERE THE DATA CAME FROM

Identified Underlying Table Parameters for Each Field That We Pulled

• Data warehouse • What was excluded?

• Production system • What parameter takes priority?
• Test environment

9
DATA OUTPUTS

File Output Options

• Excel
• Text
• System proprietary

Delimiters

Multiple Files and Keys

Flat Vs. Report Files

10
CHOOSING THE RIGHT DATA ANALYSIS SOFTWARE

With so many options (Excel, Access, IDEA, ACL, SAS, etc.), how do I choose?

11
INTERNAL AUDITING STRATEGIC OBJECTIVES

1 The software is easy to learn and use.

2 Reliance on IT professionals is minimized.

3 Reliability, portability and scalability occur in internal audit.

4 Data integrity and security occur.

5 The development of automated and continuous programs is supported.

6 Documentation is improved and compatible with electronic work papers .

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PROVIDER AND IMPLEMENTER SUPPORT

Presence in the market exists.

Team members understand auditing needs and business is done easily.

Training and user groups are available.

Regular software updates occur.

A help desk (tech support) is available.

13
TECHNICAL FEATURES AND FUNCTIONALITY

1 The file type, volume and size handling are included.

2 Data analysis functions are common (sorts, appends, summarization, gap detection and aging).

3 Documentation of data actions is performed.

4 Import data is easily reconciled and validated.

5 Data analysis functions are advanced (correlation, trend analysis, time series and statistical analysis).

6 Reports and graphics are customized.

14
COST

Costs include the purchase price and implementation fees.

Costs include upgrade fees.

Costs include job aids (automated scripts and specialty

components).

Costs include help desk support.

15
READILY ACCESSIBLE TOOLS

Microsoft Excel Microsoft Access

• Advantages • Advantages
− Incremental costs are easy to learn but do not exist. − Import capability/interfaces with other databases are
• Disadvantages improved.
− Import and data processing capabilities are limited. − Analyses relate to one another.

− A join/grouping functionality does not exist. • Disadvantages

− SQL knowledge is heavily relied upon.

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AUDIT SOFTWARE

Audit Command Language (ACL) IDEA

• Advantages
− Data handling and processing speeds are efficient.
− Data analysis functionalities are built in.
• Disadvantages
− Learning curve/script writing is hard.
• Advantages
− Graphical user interface/visual scripts are efficient.
− Audit procedures and output reporting are effective.
• Disadvantages
− Advanced statistical analysis is limited.

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DATA ANALYSIS METHODOLOGY

Establish your objective statements.

Write your steps to achieve the objective.

Example:

Analysis Statement 1: Verify that group purchase/requisitions orders have an associated invoice in the accounts payable system.
Step 1: Extract line items with the desired cost/group codes from all data sets.
Step 2: Group POs in access using a select query and include the PO number.
Step 3: Group ROs in access using a select query and include the RO number.
Step 4: Compare the AP data table to the PO select query (we want to capture POs that don’t have an invoice number).
Step 5: Compare the AP data table to the RO select query (we want to capture ROs that don’t have an invoice number).
Step 6: Review the results (noting POs and ROs that have no invoices attributed to them).

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WHAT CAN I DO WITH THIS STUFF?

Simplify Daily Processes

Establish templates that can aggregate your line-item data to dashboards for quick review.

Detect, Correct and Prevent

Review past information to detect issues, correct them and establish means to prevent it from occurring again.

Avoid Association Due to Correlation

Raw historical data forecasting should involve a level of statistics for more meaningful results.

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WHERE ARE WE HEADING?

Emerging trends in utilizing New ways to measure

data to optimize normal business performance are
business processes are More time for value-added
adopted. tasks is spent.
discovered.

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DATA ANALYTICS AND AUDIT COVERAGE
GUIDE: SAMPLE 2
SETTING THE STAGE: DATA ANALYSIS DEFINED
Data analysis systematically applies statistical and logical techniques to describe, summarize and compare data to identify business issues
in historical data (e.g., AP file – look at how quickly a client is paying invoices). Data mining is different. While data analysis generally
analyzes historical information to find anomalies, data mining omits the anomalies to search for trends and patterns that predict future
behavior. Data mining is more statistical and is used to predict the characteristics of a credit card applicant who is unlikely to pay their bills.
Data mining can be described as identifying patterns and relationships in data and deciphering that information to make useful business
decisions.

Data Analysis

1 2 3
Data analysis is the extraction of data
from a client’s information system to
Computer- perform data selection, classification,
Data Analysis Aided Audit Data Mining ordering, filtering, translation and other
Tools (CAATS) functions to provide the client with
information about their business
processes.

22
WHAT IS DATA?

Name 1. 11. Transaction Type

Division 2. 10. Quantity

Sales Amount Customer Number

3. 9.

Employee ID 4. 8. Price

Transaction Date 5. 7. General Ledger (GL) Account

Username 6.

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DATA BECOMES REPORTS

Data File Inventory Report

Unit Extended
Quantity Warehouse Part Description Quantity
Cost Cost

Part 1 XX XX XX XX XXX
Number Client
Application
1 XX XX XX XX XXX
Program
Unit Cost 4 XX XX XX XX XXX

4 XX XX XX XX XXX
Warehouse
Number 10 XX XX XX XX XXX

10 XX XX XX XX XXX

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YOU DESIGN REPORTS WITH DATA ANALYSIS

Data File(s) Summarized by Part

Number

Quantity

Extensions and Footings

Verified
Part Number Customer Name Data Analysis
Customer ID Techniques

Unit Cost
Excess Inventory

Warehouse
Number
Unusual Items

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THE SIX ELEMENTS OF INFRASTRUCTURE

Processes are Information facilitates

Policies define Informed decisions are Automation and data
assigned to key the definition of
processes. based on reports. integrity meet needs.
owners. controls.

Business Business People and Management Methodologies Systems

Policies Processes Organization Reports and Data

Risks if elements are deficient include:

Processes do not carry People lack the

Reports do not provide Methodologies do not Information is not
out established policies knowledge and
information for effective adequately analyze data available for analysis
or achieve intended experience to perform
management. and information. and reporting.
results. the processes.

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CRITICAL SUCCESS FACTORS AND COMMON PITFALLS (1/6)

Business Business People and Management Systems

Methodologies
Policies Processes Organization Reports and Data

• Focus on what matters:

− Fraud, waste and abuse (find it, fix it and recover it/financial leakage)
− Procure to pay
− Order to cash
− Financial close and consolidation
− Compliance (“just got to do it”)
− Regulatory compliance (SOX, AML, etc.)
• Business performance (improving the bottom line)
− Working capital (AP and AR) and strategic sourcing
− If we set a strategy that will benefit the organization, are we complying with it and realizing the benefits we thought we would?
− Monitoring risk across the organization (Has anything changed? Do we need to reassess our assumptions?)
○ Reputation
○ Control environment
○ Business performance
• Pitfalls
− Companies may focus on the quantity of analysis as opposed to quality.
− Companies use “what they used to do” instead of “what they want to do” when designing their strategy.
− The initial project team is limited to internal audit (IA) and major stakeholders can’t help “strategize.”
Actual story: IA gathered its global team together for a week-long meeting to establish its continuous monitoring program. They attempted to roll out a final product whose
testing was important to IA but not as much to the business owners (approval matrix verification and SOD). Process owners did not value the program and made it a low
priority.
Success: Issues that were critical to the organization and to the audit are agreed upon. High-level visibility is obtained, making it “mission-critical” to the entire organization.

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CRITICAL SUCCESS FACTORS AND COMMON PITFALLS (2/6)

Business Business People and Management Systems

Methodologies
Policies Processes Organization Reports and Data

Pitfalls Success

• The process doesn’t coordinate with IT from the
beginning. Strategies and goals are designed without
the proper data assessment.
• A scope is defined that is too large (too many results
and too many tests).
• The right data isn’t being used. A validation process for
data received does not exist.
• Individuals with the right skill set to design and
continuously monitor are not identified.
• Easy success is obtainable with a limited scope
(duplicate payments on a quarterly basis to gauge
outsourcing to India).
• Work is rolled out to all divisions (limited feelings of
being picked on).
• IT is involved from the beginning, giving them input not
just relying on output.
• This is made part of an individual’s role (not a one-time
project, and ownership is given).

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CRITICAL SUCCESS FACTORS AND COMMON PITFALLS (3/6)

Business Business People and Management Systems

Methodologies
Policies Processes Organization Reports and Data

Pitfalls Success

• Identified issues may be obsolete. • CFOs attended initial kickoff meetings and quarterly
• Results may never be analyzed, and process owners results review meetings and treated the project as
may be too busy. “mission-critical.” Each process owner knew that they
would have to present in front of their peers and
• An IA initiative may be used instead of a business management team. CFOs had the power to “urge” IT to
initiative. provide more assistance, assign temporary
responsibility during employee turnover times and keep
the project organized with one common goal.

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CRITICAL SUCCESS FACTORS AND COMMON PITFALLS (4/6)

Business Business People and Management Systems

Methodologies
Policies Processes Organization Reports and Data

Pitfalls Success

• Reporting doesn’t facilitate the process but rather
hinders. Reporting is cumbersome and is a greater task
than the actual testing.
• A noncommon reporting template may be used for all
processes.
• Data requirements and final reports may require more
than is necessary.
• An organization on SAP knew that the data
requirements might stand in the way of project success.
To facilitate the process, they laid out a specific data
requirement document along with a schedule for the
dates that they would require the data throughout the
year. They then submitted their request through the
proper channels and waited for an ABAP programming
resource to become available. The individual had the
proper skill set to write the extraction program along
with a script that would extract the data repeatedly. By
waiting for the proper resources, they established a
repeatable program instead of a one-time project.

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CRITICAL SUCCESS FACTORS AND COMMON PITFALLS (5/6)

Business Business People and Management Systems

Methodologies
Policies Processes Organization Reports and Data

Pitfalls Success

• Individuals changing positions and the program having
to be transferable may not be recognized.
• The process may not be not simple.
• Technology, such as ACL and Access, is very powerful,
but you must be able to use it.
• A manufacturing organization built the process into
standard roles in the organization and included it as
part of the individual's training for the overall job.
Backups were identified and trained not only on the
testing procedures but on the use of the software and
throughout the process behind the testing.

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CRITICAL SUCCESS FACTORS AND COMMON PITFALLS (6/6)

Business Business People and Management Systems

Methodologies
Policies Processes Organization Reports and Data

Pitfalls

• System tables may be more complicated than you

would expect. A vendor master file in systems,
applications and products (SAP) is usually composed of
at least four to five unique tables. Data needs to be
linked and relationships need to be established
otherwise it’s garbage in and garbage out.
• The testing application may be good for some but too
complicated for others.

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HOW DO WE USE THIS AND WHAT ARE SOME GOOD
EXAMPLES? (1/12)
Data Analysis: Suggested Approach
• Identify opportunities. • Acquire data. • Perform a basic analysis.
• Research possible • Produce a final report.
• Load data. • Present findings through a
opportunities. • Close the project.
• Perform validation and proofing. presentation.
• Design an assessment.

Acquisition Analysis
and and
Validation Testing

Planning
and Data Wrap-Up
Request

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HOW DO WE USE THIS AND WHAT ARE SOME GOOD
EXAMPLES? (2/12)
Possible Examples for Consideration
GL and Journal Entry Examples
• Benford’s Law on Journal Entries by User
• Journal Entries Identifying Outliers (Uncommon
Accounts, Profit Centers and Cost Centers)
• Manual-Round Dollar Entries
• Unusual Posting Dates/Times
• Split Entries Analysis (Entries Just Below Approval
Threshold)
• Suspense, Clearing and Intercompany Accounts
Analysis
• Credits Vs. Aged Invoices Analysis
• Reversed Month-End Journal Entries
• Entries Within Accounts
• Inactive Accounts Entries
• Percentage Variances in GL Accounts Between
Periods
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Travel and Entertainment Examples
• Spend by Employee
• Expenses by Employee Analysis (Just Below Threshold, Comparison of Employees
Expensing Duplicates, Expensing Airfare but No Hotel Vice Versa, Expensing Car But No
Airfare, Etc.)
• MCCG and MCC of T&E or P-Card Transactions
• Benford’s Law Analysis on Employee Expenses
• Expense Dollar and Volume Stratification
• Inactive Employee Spend Analysis
• Spend by Expense Type
• Large-Dollar Expenses Identification
• Nontimely Expense Submission
• Expense Analysis by Category (E.g., Airfare, Office Supply, Cell Phone and Professional
Dues)
• Per Diem Expense Identification and Comparison to Trips, Policy Threshold and Potential
Duplicates in Meal Reimbursement and Per Diem
• Duplicate Expense Submission
• Weekend Transaction Dates Analysis
• Activity From Personnel in Expense-Centric Departments Analysis
HOW DO WE USE THIS AND WHAT ARE SOME GOOD
EXAMPLES? (3/12)
Case Study 1

Background Project Objectives

• Global management consulting, technology services, and • Implement routines (e.g., scripts) in ACL to automate the existing
companies with offices and operations in more than 50 countries limited JE and T&E analytics.
and annual revenues in excess of $21 billion are outsourced. • Create additional automated testing routines to be executed as
• Internal audit (IA) personnel used ACL to perform limited analyses quarterly continuous controls monitoring (CCM) procedures.
as part of quarterly companywide journal entry (JE) reviews of
more than 13 million journal entry lines. All analyses were
performed manually through the ACL graphical user interface.
• IA personnel were using Excel to perform limited analyses for
employee time and expense (T&E) testing.

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HOW DO WE USE THIS AND WHAT ARE SOME GOOD
EXAMPLES? (4/12)
JE Testing Overview

• Quarterly Companywide JE Review

− Test data integrity, such as reconciliation to control totals, analysis of reporting period, and search for
blanks in key fields.
− Perform an analysis of JE approvers on an authorized list and an analysis of manual and automated
entries by document type. Entries where the document header or line-item text is blank were
identified.
• CCM: Data Exploration
− Classify unique values for key data fields, including company code, transaction code, manual vs.
automated flag, year/period and currency.
− Use statistics on amounts and posting date fields.
• CCM: Duplicates Testing
− Identify duplicates (same account and amount) for manual JEs.
• CCM: Fraud Analytics
− Search keywords for items, such as “plug,” “miscellaneous,” “temporary,” “adjust,” etc.
− Evaluate entries posted in the top 10 countries in the corruption perceptions index listing.
− Ensure that the same person enters and posts all manual JEs.
• CCM: High-Risk Account Entries
− Identify all entries posted to “high-risk” accounts.
• CCM: Timeliness of Postings Analysis
− Calculate the number of days between journal entries and posting dates.

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HOW DO WE USE THIS AND WHAT ARE SOME GOOD
EXAMPLES? (5/12)
T&E Testing Overview

• General Data Overview

− Create record count and dollar amount totals by year and month (i.e., to reconcile to control totals).
− Classify unique values for key data fields, including expense type and entry date.
− Identify the top 100 highest and lowest transaction amounts.
− Use the statistics on amount field.
• T&E Population Analyses
− Identify transactions just under $XX threshold for receipts per U.S. policy.
− Extract all transactions that are around multiples of $XXX.
− Perform approval threshold analyses for certain expense types per policy, including
training/publication greater than $XXX, business deals greater than $XXX and travel/other greater
than $XXX.
− Identify potential duplicates using multiple sets of criteria.
• Expense Type Analyses
− Identify all transactions for certain expense types assessed to be high-risk, including “Gifts, Floral,
Tickets and Promotional Items,” “Miscellaneous,” “Non-Standard Office Supplies,” “Technology
Supplies” and “Charitable Contributions.”
• Keyword Search
− Keyword search for items assessed to be high-risk, such as “gift,” “car repair,” “rent,” “pet,” “movie,”
“apartment,” “doctor,” “furniture,” “laptop,” “clothes,” “tuition,” “laundry,” etc.

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HOW DO WE USE THIS AND WHAT ARE SOME GOOD
EXAMPLES? (6/12)
Summary of Value
JE Testing: Sample Results From One
Quarter
• The amount of time to perform quarterly JE review procedures,
including manual analyses through the ACL GUI, was reduced from
approximately XX-XX hours to XX-XX hours.
• Additional CCM test results include:
− XXX journal entries (more than XXX journal entry lines) where the
same individual entered and posted the JE occurred.
− Nearly XXX JE lines were just under the $XX approval threshold.
− XXX JE lines with the word “plug” were entered, XXX JE lines with
the word “miscellaneous” were entered and nearly XXX JE lines with
the word “temporary” were entered.
− XXX JEs where the posting date was more than XX days before the
entry date occurred.
− More than XXX journal entries were posted in countries in the top 10
of the corruption perceptions index, including nearly XX journal
entries with line amounts greater than $XXX.
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T&E Testing: Sample Results From
One Quarter
• More than XXX expense transactions with the word “wine,” XX
containing the word “laundry,” more than XXX with the word “golf,” XX
with the words “doctor” or “surgery,” XX with the word “clothes” and XX
with the word “iPod” were identified.
• Nearly XXX transactions with round dollar amounts that are multiples of
$XXX were identified.
• All transactions requiring separate approvals per policy, including XXX
transactions exceeding the business meal threshold, XXX above the
training/publications threshold and more than XXX exceeding the
“other expense” threshold were identified for additional testing.
• More than XXX potential duplicate transactions with the same
personnel number, expense date, charge code, expense type and
amount were identified.
HOW DO WE USE THIS AND WHAT ARE SOME GOOD
EXAMPLES? (7/12)
More Examples for Consideration
Procure-to-Pay Examples
• Vendor Master File Analysis
• Number of Inactive Vendors With Activity
• Payments to Inactive Vendors
• Duplicate Vendors, Invoices and Payments
• Vendor to Employee Match
• Benford’s Law Analysis: Invoice,
Payments, PO and/or Credit Analysis
• Missed Discounts: Late Payments
• Authorization and Analysis of PR, PO,
Invoice and Payment
• Aging AP and Credit Processing Analysis
• Holiday Activity
• Void/Reissue Payment Analysis
• Payment Gap Analysis
• User Analysis Between Vendor Setup,
Voucher and Payment Processing
• Debit Memos/Adjustments Analysis
• Overpayments/Refunds Analysis (Unused
Credits)
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Order-to-Cash Examples
• Cash Receipts and Timely Posting Analysis
• Customer Credit Ranking Analysis
(Amounts and Authorization) and Customer
Activity Analysis (Payments and Credits)
• Write-Off Transactions Analysis
(Authorization and Timeliness)
• DSO Analysis by Order Date, Bill Date and
Payment Received Date
• Unfulfilled Customer Purchase Orders
Analysis
• User Analysis
• Customer Account Aging Analysis
• Holiday Activity
Information Technology
• Access Rights Analysis
• Multisystem Segregation of Duties Analysis
• Last User Sign-On Analysis
• Employee Master Records Analysis
• Duplicate Employee IDs Analysis
• Change Management Authorization
• New Hires/Terminations
• Problem Management Analysis
• System Logic Analysis (Write-Offs and
Refunds)
• Benchmarking Reports (Determine the
accuracy of system reports by utilizing
actual transactional and master data [i.e.,
compute what the values should be based
on business rules and then compare them
to actual monthly reports].)
HOW DO WE USE THIS AND WHAT ARE SOME GOOD
EXAMPLES? (8/12)
Sample Results: Supplier Statement Audits

Supplier statement reviews can be a significant driver for identifying unused credits or outstanding checks, which result in near-term cash recovery.

Example Vendor Credit Summary

ERP 1 ERP 2 ERP 3 XXX Suppliers
Root Cause Count Dollar Count Dollar Count Dollar
Received responses from XX%
Adjustment XX XX XX XX XX XX
of suppliers totaling xx% of spend
Duplicate payment XX XX XX XX XX XX
Overpayment XX XX XX XX XX XX
XXX Responses
Rebate XX XX XX XX XX XX
Return XX XX XX XX XX XX XX suppliers with credits
Unapplied cash XX XX XX XX XX XX
Unknown XX XX XX XX XX XX XXX Credits
Total XX XX XX XX XX XX $XXX
recovered

Example Key Findings

• Aged items on accounts were surfaced to the organization to enable them to readdress these with the vendor for more immediate resolution.
• Credits are being received by plant locations but are not being sent to the shared services centers for processing.
• Unapplied cash and returns were the most prominent root causes of credits.

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HOW DO WE USE THIS AND WHAT ARE SOME GOOD
EXAMPLES? (9/12)
Sample Results: Payment Terms
Nonstandard or “unfavorable” payment terms should be analyzed to determine opportunities for either payment discounts or extending to more favorable
terms.

Payment Demographics
xx, x%
Invoice Spend Totals by Payment Term
140 XX Invoices,
XX Invoices,
$XXM
$XXM
120
Number of Invoices (000's)

Discounted
100 Unfavorable Terms Discounted Terms
Terms
xxx Invoices (xx%) 17%
80 17%
Less than
30 Days No
Net 30+ Discount
60
No
xx, xx% Discount Less than
xx, x% xx, x% xx, x%
40 40%
30 Days No
xx, x% xx, x% Discount
Net 30+
xx, x% xx, x%
xx, x% No 43%
20 Discount
40%
0
Net 0 Net 7 Net Net Net Net 1/10 2/15 2/10 All
10 15 20 30 Net Net Net Other XX Invoices,
10 15 10
Invoice Team $XX M

Observations
• XX% of all nondiscount invoice terms required payment in less than the standard 30-day payment terms.
• $XXX in invoice spend (XX%) had immediate payment terms.

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HOW DO WE USE THIS AND WHAT ARE SOME GOOD
EXAMPLES? (10/12)
Fixed Assets

• Look out for aging CIP.

• Estimate/recalculate depreciation.
• Facilitate item master cleanup.
• Verify that accumulated depreciation does not
exceed cost for any asset. • Search for negative depreciation.
• Identify “credit” assets. • Use inconsistent/outlier useful lives/depreciation
methods.
• Identify land that is depreciating.
• Perform a post-addition percentage analysis
• Identify assets assigned out of the useful lives
(how much more cost added after depreciation
policy.
started).
• Determine the assets setup with the cost below
• Search for aged and fully depreciated assets.
the capitalization threshold.
• Perform an asset-classification analysis (leased
• Estimate the impact to P&L of
vs. fixed or long-term vs. short-term).
increasing/decreasing capitalization threshold.
• Compare the asset turnover ratio to the industry
• Review for duplicate asset setups.
average.

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HOW DO WE USE THIS AND WHAT ARE SOME GOOD
EXAMPLES? (11/12)
Inventory

• Inventory by type summary is identified. • Inventory vs. sales analysis is done.

• Inconsistent costing is identified.
• Inconsistent units of measure with the same unit
costs are used.
• Category types are verified.
• Cost analysis is extended.
• A quantity analysis is done.
• A per unit cost analysis is performed.
• Current vs. prior-year cost comparison setup is
performed.
• Reports of unit cost changes are used based on
prior-year quantities and current-year unit costs.
• Sales analysis is done.
• Potential excess inventory is identified.
• Margin review occurs.
• A user analysis between the purchase order and
receipt is done.
• An inventory adjustment analysis (write-offs) by
items, users, locations, transaction type and time
of day is performed.
• An inventory adjustment analysis (returns) by
items, users, locations, transaction type and time
of day is done.
• A scrap activity analysis is performed.
• Negative inventory balances and/or inconsistent
fluctuations in inventory accounts between months
are identified.

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HOW DO WE USE THIS AND WHAT ARE SOME GOOD
EXAMPLES? (12/12)
Lessons Learned

Senior management buy-in is crucial for the success of

any controls monitoring projects.

Requirements, documentation and change request

procedures are defined.

IT should be involved earlier on during the project.

Ensure to test, test and test.

Focus on high-risk processes.

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