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Connections09 Manuel Coello
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Connections09 Manuel Coello

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ACL Presentation given in Connection 2009 in NYC

ACL Presentation given in Connection 2009 in NYC

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  • 1. Copyright © 2009 ACL Services Ltd. Audit Transformation Manuel Coello Continuous Monitoring Stanley Works
  • 2. ACL Global User Conference 2009 Copyright © 2009 ACL Services Ltd. 2 The story: How an Internal Audit Department was able to achieve +$1.5M in benefits with zero capital and the use of ACL • $1.1M cash recovered through the Continuous Monitoring Program and special projects • Transformed Internal Audit practices through the use of CAATTs • Served as catalyst for driving “change” in the Company
  • 3. ACL Global User Conference 2009 Copyright © 2009 ACL Services Ltd. 3 Brief background § Stanley Works – Founded in 1843 and based in New Britain, CT – Manufactures Tools and Security Solutions – Grew revenue from $2.2B in 2003 to $4.5B in 2008 – 16,000 employees worldwide
  • 4. ACL Global User Conference 2009 Copyright © 2009 ACL Services Ltd. 4 ACL was used to deliver unprecedented audit value Payments CONTINUOS 1 MONITORING Payroll Travel Expenses INTERNAL Introduce CAATTs 2 Performed off-field work AUDITS SPECIAL Vendor Litigation 3 PROJECTS Government compliance
  • 5. ACL Global User Conference 2009 Copyright © 2009 ACL Services Ltd. 5 Spent time crafting a master plan
  • 6. ACL Global User Conference 2009 Copyright © 2009 ACL Services Ltd. 6 Continuous Monitoring – Vendor Payments 1 Per 2002 benchmark study by IOMA: 1.6% of vendor payments are erroneous The “Two” tests: Challenges: Same invoice paid: Ø 9 different systems/ 1. By two different systems large volume of data 2. By two different businesses Ø Info in different tables Ø Unsure of what to test 3. To two different vendors The “Typo” tests: ACL Solution: 1. Same invoice number and Ø Import large files vendor number but different date Ø Duplicate functionality 2. Same amount, vendor and date Ø Join/Relate Tables but different invoice number Ø Repetition through 3. Same vendor and date and scripts similar amount
  • 7. ACL Global User Conference 2009 Copyright © 2009 ACL Services Ltd. 7 Aggressively focused on remediation
  • 8. ACL Global User Conference 2009 Copyright © 2009 ACL Services Ltd. 8 Continuous Monitoring – Payroll Unusual Transaction Tests: Suspicious Employees Tests: 1. Payment beyond termination dates 1. Duplicate EE/similar names 2. Multiple changes in rate 2. Salaried EE without email 3. Excessive overtime 3. EEs with same bank account but different last name 4. Multiple or unusual bonuses 4. EE and vendor with same address, 5. EE with both merit increases and bank account or Tax ID/SSN lump sum merit increases 5. Hourly EE with “regular” as only earnings ACL Solution: Ø Merged 52 payroll files into one ACL file Ø Filtered false positives Ø Cross-tab/summary/analysis
  • 9. ACL Global User Conference 2009 Copyright © 2009 ACL Services Ltd. 9 Internal Audit - CAATTs 2 2008 Report to the Nation on Occupational Fraud & Abuse: Typical U.S. organization loses 7% of its annual revenues to fraudulent activity Fraud/Risky Areas Analysis 1. Suspicious invoice sequence 1. Collectability analysis 2. Benford Law 2. AR/Inventory write-offs 3. Payment for even multiples 3. Excess and obsolete 4. Segregation of duties 4. Journal Entries 5. FCPA 5. Data Analysis (Subledgers) Compliance Operational 1. Invoices falling below approval 1. Vendor/Customer terms limit 2. Purchase of unneeded material 2. FA useful lives 3. Purchase price history 3. Customer credit limits 4. Aged open PO / shop orders 4. Sales price overrides 5. P-cards and T&E 5. Completeness of Master Files
  • 10. ACL Global User Conference 2009 Copyright © 2009 ACL Services Ltd. 10 Summary § Looking back – Results were achieved that seemed impossible – Internal Audit has created value above and beyond the typical control recommendations – The paradigm is changing that auditors are here to hurt us § Looking forward – Taking the project to the next level by acquiring upgraded technology and reengineering the audit processes – Bringing the Continuous Monitoring program to Europe – Training department staff in ACL “all-team-effort”

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