Technology Applications in the Age of Integrity Integrity Forum 2006 Tony Murphy Vice President, Worldwide Sales ACL Services Ltd

Technology Applications in the Age of IntegrityIntegrity Forum 2006

Tony MurphyVice President, Worldwide SalesACL Services Ltd.

2

© 2006 ACL Services Ltd.

About ACL Founded 1987 – Global leader in audit, controls

testing, and compliance technology solutions

Corp Headquarters Vancouver, BC

Clients 170,000 users in 130 countries70% of Fortune 500Big 4 Accounting FirmsState & federal governments

Products Data AnalyticsACL Desktop/Network EditionACL Server Editions – AIX, Linux, OS390/400, WindowsDirect Link for SAP

Continuous Controls MonitoringPurchase-to-Payment T&E Expenses PayrollPurchasing Cards Order-to-Cash General Ledger

Services Technical Support, Implementation Services, Training

3


Today’s Agenda

Spotlight on Internal Controls Continuous Auditing and Continuous Monitoring

DefinitionsResponsibilities Impact

ACL Solutions Summary

4


Internal Controls: What’s at Stake?

Compliance Issues

Cost-effectively sustaining compliance Market perception/share value Negative impact on credit rating

Business Performance Issues

Operational inefficiency Revenue leakage Fraud

Technology is seen as one way companies can successfully manage these issues

5


Compliance Confusion

There’s a great deal of confusion in the market about “Compliance”

Following slides Let’s have some plain talk about what compliance is,

why it’s important to a business and what ACL is doing to help companies address a critically important slice of their compliance requirements

6


Sustainable Compliance

Regulatory environment now driving the need to Efficiently and cost-effectively sustain controls assessment

and testing efforts

Determine on a timely basis when control deficiencies occur Quantify the impact of control deficiencies Improve effectiveness of controls Gain assurance over effectiveness of controls Need to make

compliance attainable, sustainable, and cost-effective Additional goal: improve overall business performance

How can audit departments assist?

Build compliance processes into the foundation of the business

7


Gaining Clarity: Some Definitions

Continuous AuditingMethod used to perform audit activities on a continual

basis – includes control and risk assessmentPerformed by Internal Audit

Continuous MonitoringProcesses to ensure policies/processes are operating

effectively and to assess adequacy/effectiveness of controls

Performed by operational/financial management

Continuous AssuranceCombination of continuous auditing and audit oversight

of continuous monitoring

8


Continuous Auditing vs. Continuous Controls Monitoring

A Question of Responsibility:

Management is responsible for establishing and monitoring the effectiveness of internal controls

Audit is responsible for determining whether management has been successful in its responsibility

Continuous Auditing and Continuous Controls Monitoring frameworks are vital parts of the controls environment

9


Relationship of Continuous Auditing/Monitoring/Assurance

Role of continuous auditing dependent on management’s role in continuous monitoring of controls Inverse relationship: the

greater the role of management, the less of a direct role of internal audit

True continuous assurance Depends on effective monitoring

by management of internal controls and Audit’s independent assessment of that function

10


Continuous Auditing

Compliance requirements now driving the need toEfficiently and cost-effectively sustain controls assessment

and testing effortsDetermine on a timely basis when control

deficiencies occurQuantify the impact of control deficiencies Improve effectiveness of controlsGain assurance over effectiveness of controls

Continuous AuditingShift from traditional approach of periodic cyclical audit

processesMethod used to automatically perform control and risk

assessments on an ongoing basisAllows audit to provide ongoing risk and control

assessmentsTechnology is key

11


Continuous Controls Monitoring

Process performed by management to determine whether policies and controls are operating effectively

Establishes control objectives and assurance assertions – and uses automated tests to identify activities and transactions that fail to comply with controls

Embedded in key business processes Allows management to fix control problems on a

timely basis – improves controls and improves operational performance

Technology is key

12


CA & CCM: An Integrated Approach

13


ACL’s Approach to Enterprise Financial Transaction Monitoring

Review 100% of transactions across

all systems & platforms

Apply automated tests to critical control points

Present quantified control

exceptions

Provide visibility into controls health to all stakeholders

Internal & external

14


ACL’s Complementary Solutions

Financial Transaction Monitoring

Audit Tools

DISCOVER & DETECT…

ACL Audit Analytics

MONITOR ….Continuous Controls Monitoring (CCM)

15




ACL Data Analytics

DISCOVER & DETECT… Interactive analysis built for AuditAnalyze every transaction, across system boundaries

Automate audit best practices Auditable resultsDesktop/Network, Server Editions, Direct Link for SAP

Audit Tools

16



Continuous Controls Monitoring (CCM)

MONITOR ….Core business processes, end-to-endKey controls, across system boundariesBased on COSO frameworkCCM applications:

General LedgerOrder-to-Cash CyclePayrollPurchase-to-Payment CyclePurchasing CardsTravel & Entertainment Expenses


Audit ToolsFinancial

Transaction Monitoring

17


Benefits and Outcomes

Near-term – Revenue recovery & complianceReturn on investment, early warning system, regulatory

complianceExample: Recovery of duplicate payments and

vendor overcharges

Mid-term – Operational improvementExample: Modifications made to system design and

controls such as change to vendor master entry

Long-term – Enhanced control environment Improved external audit resultsTangible, demonstrable evidence of effort

18


Summary

Compliance requirements and business process improvement are not optional

A sustainable approach is needed Audit has options:

Expand technology investment to apply continuous auditing techniques

Advanced use of data analytics, i.e. script development and automation

Sponsor comprehensive technology solutions to automate controls monitoring within business processes

Implement continuous monitoring technology

19


Cost savings

Business Performance Optimization

Cost-effective risk mitigation

Bottom-line results

Operational efficiencies

Fraud reduction

Summary

Connected compliance across the business supports compliance with the benefit of enhanced business performance.

Streamlined internal & external audit

Sustainable process for compliance

Compliance Requirements

Internal Controls

Effectiveness

Internal Controls

EffectivenessReduced time for reporting/signoff

20


Documents

Technology Applications in the Age of Integrity Integrity Forum 2006 Tony Murphy Vice President, Worldwide Sales ACL Services Ltd