Rhd + Visual Risk Iq Presentation On Continuous Auditing District Conference 2009 Feb 26

IIA Spring District Conference

Data Analytics
Fraud / Ethics Track

Matt Cleaver
Joe Oringel

IIA District Conference
Durham NC
February 26, 2009

Scheduling and Resource Overview
Our Internal Audit Team

• Audit team of 6 FTE’s

• Annual Audit Responsibilities
• 16 High Risk Strategic Audits
• SOX 404 Compliance Testing
• ERM Integration
• Special Projects (10-20% of resources)
• Direct Assistance to External Auditors

Visual Risk IQ – GRC thought leadership, practically applied
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© 2008 Visual Risk IQ, LLC, All Rights Reserved

Company Background

One of the nation's leading Yellow Pages and online local
commercial search companies.
• $2.5B annual revenues
• 600K+ customers
• 20K+ suppliers
• 4K+ employees
• 28 state territory

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Expense Management Audit Background

• Automated AP Processing system with decentralized
manual invoice entry

• Oracle Processing and GL environment

• Over 15 separate legal and operating business entities

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Company hired Visual Risk IQ for
Data Analysis including Continuous Auditing

• Visual Risk IQ project approach was distinctive
• One-time use of a modern continuous auditing (CA) tool
• Data acquisition was simple - one Oracle export
• Large library of existing risk checks
• Data validation was a breeze
• CA Maturity model was central to service delivery
• Knowledge transfer, not buying hours
• Practical advice on using our existing tools
• Helped us understand differences between ACL,
ERP query tools, and advanced Continuous Auditing

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Brainstorming session was an
integral part of audit project planning

• Assume data acquisition is free
• What other data sources would be useful?
• Is the data available internally?
• Could external data sources provide additional comfort?
• What are the Fraud Risk / SAS 99 implications?
• Compliance, efficiency objectives? Both?

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Audit Procedures

• Gather and Validate Complete Population
• Validate $ amounts against General Ledger
• Validate user responsibilities and access rights
• Validate Requisitioner/Approver and limits
• Identify Potential Duplicate Payments
• Identify Potential Fraudulent Purchases
• Unusual relationships between Bank Accounts
• Unusual relationships between Addresses

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A basic continuous auditing maturity model

Basic practices Level 2 practices Better practices Continuous auditing

Staff has some basic Some IT- and data- Audit staff and leaders are No need for ad hoc data
data literacy. Knows specific specialists are IT- and data-literate. Little acquisition - CA and CCM
how to ask IT for accessible, either in- distinction between IT audit systems are well-integrated
People
information. house or as consultants and financial / operational into finance and operations
audit people

Basic data capture and Some re-usable scripts Scripts are stored, Continuous auditing and
analysis using MS-Office exists and are used on- scheduled, and run at monitoring technologies
or ERP Query tools. demand for relevant appropriate intervals contribute to all audit steps
Heavy reliance on audit projects
Technology Corporate IT

Business is reactive to Audit can access data IT consults with IA prior to Data driven early warning /
requests from Internal directly making system changes risk alerts include both
Audit and usually helps that are known to affect IA. business and controls /
Governance
in a timely way. audit implications.

Risk assessments are Risk assessments are Risk assessments consider Risk alerts are embedded
conducted annually conducted more objective and subjective into the IA methodology
Audit frequently than annually data. Gaps between and drive specific
methodology objective and subjective responses real-time
assessments are
highlighted

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Maturity Model Implications for Company

• Strong data analysis skills created flexibility
and capacity for what Audit could take on
• Good audit charter - broad access to data
• Basic data analytics technology existed, and more
was available with ERP queries
• Opportunity for more frequent control assessment
• Make tests preventive by changing when they’re done

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Expense Management Analysis

• Analyzed all AP disbursements over a 24 months using ACL

• Scripts were leveraged from VRIQ training session

• Approximately 20 different scripts were run
• Confirming over $2.5M of duplicate payments
• Since identification, over $2.2M recovered

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Root Cause Issues

• Negligent Manual Overrides
• Invoice # manipulation (append with numeric or alphanumeric characters)
• Transposed Invoice / Payment date
• Inconsistent vendor naming convention (ex. “Oracle” vs “Oracle Inc.”)

• System Coding (single entity view)
• System designed to evaluate identical invoices within single entity
• Over 15 paying legal entities

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Audit Recommendations

• System enhancements to identify duplicate payments
across all legal entities
• Matching $ amounts, invoice numbers, and vendor
name/invoice date as potential duplicates

• Continuous monitoring by IA using ACL
• Weekly 1.5 hour investment has prevented additional
$300k in duplicate payment

• Oracle extract query developed to identify duplicates
prior to payment (process owner review)

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Additional ACL Analytics

• Pricing and Discounts
• 1.7M transactions totalling $1.4B revenue
• Trending Analysis (YoY, market, brand, item, etc.)
• Price overrides through inappropriate discounting
• Identification of obsolete programs

• Commissions
• Customer set-up
• Customer classification
• Calculation of commissions

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Questions / Wrap-up

Matt Cleaver
matthew.cleaver@rhd.com
(919) 447-4846
Joe Oringel
(704) 752-6403
joe.oringel@visualriskiq.com
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Visual Risk IQ
Points of distinction

• We focus solely on emerging enablers for continuous auditing and
monitoring
– Educating the market
– Rapid, low-cost, value-focused pilot projects

• Our clients’ business objectives and current
state of maturity drive our recommendations
and projects

• People and process changes are primary, supported, as appropriate,
with enabling technologies

• We maintain an in depth, up-to-date knowledge of all software and
process solutions within the categories

• Key to our success are alliance relationships with leading software
providers and a broad array of complementary professional service firms
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Rhd + Visual Risk Iq Presentation On Continuous Auditing District Conference 2009 Feb 26

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