Using  Process  Mining  for  Internal  Auditing  

The   value   of   an   internal   audit   to   the   success   of   a   business   is   in   the   increase   in  effectiveness   and   efficiency   of   the   business   organization   and   processes   through  minimisation   of   risks,   which   can   arise   for   example   from   known   or   unknown   violations   of  process  and  compliance  regulations.  

Motivated  by  various  scandals  and  the  economic  crisis  which  now  lies  behind  us,  the  role  of  the  internal  audit  has  been  reconsidered,  and  a  desire  has  been  expressed  for  proactive  methods  of  operating  instead  of  reactive  methods.  Regardless  of  how  vigorously  this  desire  has   been   expressed,   process   mining   fits   perfect   with   this   discussion   about   trends,   like  continuous   auditing,   in   which   technology   plays   a   central   role.   In   contrast   with   other  analytical  auditing  tools,  process  mining  offers  an  explicit  view  of  the  processes.  

1.  Process  auditing  and  process  understanding  in  the  digital  world  

The   classical   approach   to   process   auditing   is   to   conduct   interviews,   observe   processes,  and  take  samples.    The  results  are  exhaustively  compiled,  and  in  many  cases  depict  more  of  the  desired  processes  and  less  of  the  actual  processes.  

Business  processes  are  supported  these  days  by  ERP  and  BPM  systems,  which  on  the  one  hand   are   too   complex   to   give   a   complete   overview,   but   on   the   other   hand   can   create   a  digital  log  of  all  individual  activities.  Process  mining  uses  these  digital  traces  to  reconstruct  a  process   reality   from  start   to   finish,   including  all   actual  occurring  variations  and  deviations.  The  auditor   gains   an  understanding  of   the  process   at   least   an  eye-­‐to-­‐eye   level  with   those  responsible  for  the  process.  

2.  Maximum  „sample“  of  100%  

In  the  classic  method,  natural  limits  are  set  for  the  size  of  the  sample.  The  more  complex  the   process   under   investigation,   the   smaller   the   sample   tends   to   be.   This   limits   its  meaningfulness  to  the  entire  process.  

For  process  mining,  these  limitations  do  not  apply.  The  representation  of  processes  and  testing   are   always   based   on   100%   of   all   logged   business   transactions,   for   example   for  possible  compliance  violations.  

3.  Visualisation  of  process  risks,  exceptions,  and  controls  

Unfortunately,  things  don't  always  run  the  way  they  should.  The  greater  the  deviation  in  the   individual  progress  of  a  business  transaction  from  the  desired  process  or  core  process,  the  greater  the  possibility  of  risk  to  the  business.  In  order  to  actually  evaluate  the  risk,  you  must  verify  whether  the  internal  controls  grasped  any  process  exceptions  which  would  leave  behind  digital  traces  in  the  system.  Process  mining  uses  special  filters  to  visualise  all  process  exceptions  upon  request,  and  also  shows  the  existence  or  absence  of  controls.  

 

 

4.  Increase  quality  and  reduce  costs  

The  experiences  of  auditing  departments  have  shown  that  audit  preparation  and  planning  is  an  ideal  deployment  phase  for  process  mining.    

The   auditor   can   analyse   the   process   more   effectively   and   more   efficiently,   recognise  possible   risks,  and  better  prepare   the  actual  audit   than  before   the  deployment  of  process  mining.  

The   expenses   for   audit   preparation   are   significantly   reduced   and   at   the   same   time   the  quality   of   the   audit   is   increased,   since   it   takes   place  with  much  more   focus   by   using   the  previously  acquired  knowledge.  

The   bottom   line   is   that   process   mining   reduces   the   total   expenditure   for   an   audit   by  about  25%.  

5.  Continuous  monitoring  and  auditing  

In  almost  all  organisations,  the  auditing  work  follows  a  yearly  plan  and  each  audit  takes  place   once   a   year.   For   especially   important   or   risk-­‐laden   processes,   this   is   not   enough.  Behind  the  keyword  „continuous  auditing“  hides  the  desire  for  a  continuous  monitoring  of  processes.  

Process   mining   represents   an   ideal   cornerstone   for   this,   because   it   automatically  reconstructs  the  actual  process   in  the  given   intervals  from  the  current  "digital  traces"  with  all   variations   and   required   key   figures,   and   the   auditor   has   a   constant   overview   of   the  processes  and  the  effectiveness  of  the  internal  system  controls.  

6.  Process  mining  as  a  growth  sector  in  internal  auditing  

Process  mining  helps  the  auditor  to  position  themselves  as  an  advisor  for  value-­‐oriented  improvements   within   the   business.   He   is   no   longer   dependent   on   subjective   statements  from  those  involved  in  the  process  and  those  responsible  and  samples,  rather  his  statements  are  based  on  objective  facts  and  efficient  analysis.  

The  auditor   is   the   supplier  of   strategic   and  operatively   valuable  analysis,   and  a   sought-­‐after  partner  for  top  management.  

Go  for  Gold!  

Visit  our  Website:  www.processgold.de  or  simply  give  us  a  call:  +49-­‐6174-­‐99898-­‐77.