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CA&M Perjects


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CA&M Perjects

  1. 1. Continuous AuditingJuly 01, 2011Jason ZhangContinuous Auditing Specialist
  2. 2. Agenda• Overview• Key Testing Areas by Process• Data Process• Key Benefits / Opportunities• Script Lists
  3. 3. Continuous Auditing OverviewContinuous Auditing Is A Process Of Extracting Data On A FrequentBasis To Assess The Full Population Of Transactions Using Technology Scope To Date* Results •Vendor Master • Cash Recovered •Duplicates Payment • Potential Incremental Benefits •Travel Expenses Identified •Payments • Improved Controllership & •Invoice Processing Compliance •Fixed Assets • Real-Time Remediation •Unvouched • Fraud Deterrence •Procurement •Payroll •General Ledger Automated Scripts Developed To Identify Potential Operational , Cost, & Fraud Issues PLATFORM FOR GROWTH 3
  4. 4. Key Testing Areas By ProcessDuplicate Payments Vendor Master Unvouched Invoice ProcessingDuplicates - Same Data Validation Aging Summary By Business & Aged Open Invoices Vendor & Inv. # Vendor Changes Plant Debit BalancesDuplicates - Same Unfavorable  Aging Summary Inv. #, Diff Vendor Even Payment Payment Terms by Business & AmountsDuplicates - Same Vendor Employees Added Vendor, Amount, Manual Check To Vendor Master  Aging > 90 Days Date Requests Non-ACH Payment  Debit Balances Payments to Method Employees Duplicate Vendors OFAC & Suspicious Countries PLATFORM FOR GROWTH 4
  5. 5. Key Testing Areas By Process T&E Fixed Assets/GL Payroll P2POut Of Pocket Useful Lives Payment Terms Payments BeyondExcessive Mileage Timeliness of CIP Termination Date Invoice Prior To Transfer PO DateEven Amounts Multiple Changes CIP Aging by Plant Merit Increase/ Split PurchaseSignificant & Segment Bonus Orders Transactions  Negative CIP Duplicate Non-PreferredSplit Transactions Employees Vendors  Asset Classification Same Bank PO Price Duplicate JEs Account And Diff Differences Inactive GL Account Clock Numbers Employees & Vendors With Same Address /Bank Account PLATFORM FOR GROWTH 5
  6. 6. Data Process Other ACL Script To Import Data ACL Scripts Exceptions For Testing posted in Web Sharepoint Application Email Notification of exceptions Using Technology To Drive A More Effective Audit Process PLATFORM FOR GROWTH 6
  7. 7. Key Benefits / Opportunities Key Benefits Realized Other Potential Benefits Other Opportunities  Duplicate Payment Recoveries  Debit Vendor Balances  Inactive Vendors & Vendors With Unusual Payment Terms  Reduction in Aged Unvouched  Unvouched Debit Balances  Excessive Mileage  Duplicate T&E Expense  Outstanding Aged invoices Submission Recoveries  Split P-Card Transactions  AMEX Refunds Not Being  Payments Prior To Due Dates Cashed  Unusual Payment Runs  Employees Paid Beyond  Monitoring Useful Lives Termination Date Recoveries  Aged CIP / Negative CIP  Elimination of Duplicate Vendors & Reduction in Non- ACH Vendors  Monitoring OFAC Vendors Key Is To Drive Exception Reporting & Analysis Into Functions PLATFORM FOR GROWTH 7
  8. 8. Summary by Area Frequency System Quarterly Monthly Concur Weekly Yearly Daily SAP ADP Ref Test 1 Vendor Master √ √ √ √ 2 Duplicates Payment √ √ 3 Travel Expenses √ √ √ 4 Payments √ √ 5 Invoice Processing √ √ 6 Fixed Assets √ √ 7 Unvouched √ √ 8 Procurement √ √ 9 Payroll √ √ 10 General Ledger √ √ 11 System Access √ √Key exception tests identified and automated to run on a frequent basis PLATFORM FOR GROWTH 8
  9. 9. Vendor Master Ref Indicator Exception Test Test quality of the information contained on key fields. Tests include: - PO BOX as only address - Usage of characters in the Tax fields 1 Quality of Fields - Blank Tax Ids on ZVEN type vendors (Non-Affiliate Company) - Invalid Social Security numbers (based on certain rules) - Invalid format on tax ID 2 Vendor Access Summary by User ID and name to monitor vendor additions by an unauthorized employee 3 Field Changes Shows the "prior" and "new" on key fields such as name, address, p_terms and tax ID 4 Duplicate Vendors Duplicate Vendors using name, address, tax ID and Bank Account 5 Non-ACH as payment method Identifies vendors added where the payment method is not electronic (ACH, Orbian, etc) 6 Unfavorable Payment Terms Indentifies payment terms that are not in compliance with Company 7 Suspicious Country Vendors where the country has been ban by the government 8 OFAC Vendors in the OFAC List 9 Inactive Vendors Identify vendors that have not have vendor activity in the past 18 months 10 New Vendors List all new vendors with all key fields in the master 11 B&D Data Unusual vendors using data from B&D including legal name, legal address, etc 12 Conflict of Interest Match name, address, numeric address and Tax ID between Vendor and Employee Master Files PLATFORM FOR GROWTH 9
  10. 10. Duplicate Payment Ref Indicator Exception Test 1 Duplicate payments - same vendor Same vendor, invoice number, invoice date, different amount 2 Duplicate payments - two vendors Same invoice paid to two different vendors 3 Duplicate payments (clerical errors) Duplicate by vendor, amount and invoice date 4 Duplicate payments - two systems Same invoice, vendor, date and amount but two different systems KPI H2-07 H1-08 H2-08 H1-09 H2-09 H1-10 H2-10 H1-11 Total Amount 455,636 247,313 406,534 116,746 191,147 209,853 275,777 49,027 1,952,034 Count 106 102 101 63 67 45 49 20 553 500,000 120 450,000 100 400,000 350,000 80 300,000 Amount 250,000 60 Count 200,000 40 150,000 100,000 20 50,000 - - H2-07 H1-08 H2-08 H1-09 H2-09 H1-10 H2-10 H1-11 PLATFORM FOR GROWTH 10
  11. 11. Travel ExpensesRef Indicator Exception Test * Individual cash transactions greater than $100. Out of Pocket * YTD out of pocket summary by person and frequency1 * Individual mileage charges greater than $100 Excessive Mileage2 * Mileage summary by employee showing total amount and total number of charges * Identifies transactions where the word "gift" was written in the description Gift Cards3 * Summary of gift related expenses by employee YTD4 AP Transactions * Transactions with multiples of $1005 Significant Transactions Extracts the largest 10 transactions of the 10 key expense types such as hotel, airfare, meals, misc, etc.6 Split Transactions Indentifies employees double charging the credit card in order to circumvent the spending limits.7 Employee with miles Summarizes the accumulated mileage8 Gifts Gift by employee Duplicate Payments Duplicate T&E Charges. Matches cash vs. credit card transactions by employee, amount910 Suspicious MCC Suspicious MCCs * Individual cash transactions greater than $100. Out of Pocket11 * YTD out of pocket summary by person and frequency Business above avg spending Plants witth expenses averaging twice as much as the company avg spending12 High risk employees using a scoring system and a weighted risk model using expenses above avg, OOP, late Suspicious Employees13 submissions, high mileage charges and higher-than-avg misc14 Suspicious Vendor Activity Vendors witth expenses averaging twice as much as the company avg spending PLATFORM FOR GROWTH 11
  12. 12. Invoice Processing & Payments Ref Indicator Exception Test 1 Aged open invoices Trade invoices older than one year 2 Debit balances Vendor balance with negatives. 3 Even payment amounts Payment of multiples of $100 and greater than $500 4 Unusual trends Trends by month and identify unusual volume changes (amount and frequency) 5 Benford Analysis Benford Analysis by Business showing unusual patterns using the first two digits of the invoice amount 6 Excessive billing Analyze billing frequency and identify unusual vendors Ref Indicator Exception Test 1 Manual Checks Checks with document type ""KZ" Match payments made to employees using the vendor master and employee master and match fields as Payments to Employees 2 address, numeric address, name, tax id. 3 Unusual payment runs Payment runs during the weekend 4 Prior to due dates Payments prior to due date PLATFORM FOR GROWTH 12
  13. 13. Fixed AssetsRef Indicator Exception Test 1 Useful Life Useful life test comparing the useful life used in SAP vs. the useful life per policy Support of the determination of "Compliance" or "Not Compliance" on each addition, supporting the comparison of 2 Useful Lives (Support) each addition in the month 3 Unusual Useful Life Unconventional useful life (not the exact normal useful life) by business 4 Leasehold Improvements Extract of all addition of the months for Leashold Improvements 5 Old CIP CIP greater than 6 months and 70% budget consumption by business 6 Old CIP Details Details of above analytic 7 CIP Aging CIP by plant and SWK segment 8 Negative CIP CIP with negative balances by business 9 Asset classification Match words with wrong asset class by business10 Idle Assets Idle assets older that 90 days (aging report) with NBV Lack of activity that shows that asset11 is stagnant CIP without activity in more than 2 months12 Significant FA transactions Significant additions, transfers, dispositions13 Asset avail for transfer Catalog of asset avail for transfer14 Asset master information Field quality based on certain rules to test the content such as missing fields (cycle, plant, location) PLATFORM FOR GROWTH 13
  14. 14. UnvouchedRef Indicator Exception Test Aging summary by Business Summary by business and plant with aging buckets of Less than 30, 31-60, 61 -90, 91-120, 120-180 and greater than 180. This has one report for Trade and1 and Plant another for Affiliates. It is an output file at the company level and one for each business for individual analysis. Aging summary by business2 Aging summary by business, HFM Num and vendor. and vendor3 Older than 90 days Unvouched older than 90 days and greater than $100. A field added for priority "A" through "D" based on the amount. These excludes offsetting accounts4 Negative Balance Debit entry (negative) recorded on a PO line as "only" transaction and is older than 120 days Top vendors with old5 Top 5 vendors of each business with unvouched older than 90 days . This report could be used to trigger a request for vendor statements. Unvouched6 Offsetting entries Unvouched with offsetting entries. PO line with two offsetting entries with net amount <$100 or >-$1007 Mismatch in PO lines Transaction posted to wrong PO lines8 Expired Cost Center in PO PO with a Cost Center that has expired Receipts with two different9 Same PO. same PO line and same amount but different transaction type transaction types PLATFORM FOR GROWTH 14
  15. 15. Procurement & Payroll Ref Indicator Exception Test 1 Retro POs PO date greater than invoice date 2 Preferred Vendors Summary of purchases by vendor and CoCo 3 Split POs PO date greater than invoice date 4 Payment Terms Unfavorable payment terms (global analysis) Ref Indicator Exception Test 1 Duplicate payments Two checks for same amount in the same period 2 Excessive overtime Overtime greater than 30 hours per week Duplicate social security numbers, invalid SS or SSN in sequential 3 Social Securities order 1,Duplicate employee name 4 Duplicate Employees 2.Similar name 1, Same bank account and diff clock numbers and diff last name 6 Suspicious Employees 2,Salaried employees without email account 8 Multiple WIN Awards 3 or more WIN Awards in prior 12 months 9 Multiple Merit Increases 2 or more salary increases in prior 12 months 10 Trend Analysis Comparison of key compensation items among PLATFORM FOR GROWTH 15
  16. 16. General LedgerRef Indicator Exception Test 1 User ID Testing Summarizes JEs by "Creator" 2 Even Dollar JEs Identifies journal entries w ith even dollar transacactions over a specific threshold. Identifies journal entries w here a restricted w ord (e.g. suspense) is found anyw here in the journal entry description field that may indicate an 3 Suspicious JEs invalid or suspicious entry. 4 JE Data Validity Identifies data elements that deviate from expected value and formats. Determine accuracy and validity of journal entries created in the daily journal entry file to avoid duplicate entries. Using Same account/same amount & same JE#/same amount 5 Duplicate JEs 6 Inactive GL Account General ledger account created and < 5 JE’s posted over the past year Identifies journal entries greater than the minimum threshold amount, w here the journal entry w as posted to an account as a debit or credit 7 Unusual Account Posting contrary to w hat w as expected. These expectations are based on the GL account classification parameters. 8 Create JE vs. Create Account (SOD) Identify journal entries in the daily journal entry file that w ere created by the same individual that created the general ledger account. 9 New GL Accounts New accounts created by month for the past year10 Close Calendar Postings by User Line count report by User ID, Bus. Unit, Day show ing grand total during month end close11 Days Differences Identifies difference betw een date JE w as entered and w hen it w as posted - used for backdating analysis. Identifies accounts from COA w here a restricted w ord (e.g. suspense) is found anyw here in the GL account description field that may indicate12 Suspicious GL Account Descriptions an invalid or suspicious entry.13 Close Calendar Unusual Dates Identifies journal entries that w ere entered (accounting document date) by individuals (not FI-Batch) outside of the close calendar w eek.14 Create vs Approve JEs (SOD) Identifies journal entries in the daily journal entry file that w ere created and approved by the same employee.15 One Time GL Account General ledger account created and closed w ithin the same month PLATFORM FOR GROWTH 16
  17. 17. System AccessRef Indicator Exception Test 1 SOD01_VM_INV Maintain a fictitious vendor and enter a Vendor invoice for automatic payment 2 SOD02_Payment_VM Maintain a fictitious vendor and create a payment to that vendor 3 SOD03_PO_INV Purchase unauthorized items and initiate payment by invoicing 4 SOD04_INV_GR Enter fictitious vendor invoices and accept the goods via goods receipt 5 SOD05_PO_Payment Enter a fictitious purchase order and enter the covering payment 6 SOD06_RBINV_PO Enter unauthorized purchase order and release a previously blocked Invoice to offset the purchase order 7 SOD07_RBINV_GR Receive goods against a purchase order and release a previously blocked Invoice to offset the receipt Risk of the same person entering a Purchasing Agreement for materials and then adjusting the IM 8 SOD08_PA_ECCD inventory for those materials. 9 SOD09_Check_VM Maintain a fictitious vendor and create a payment to that vendor10 SOD10_INV_Check Enter fictitious vendor invoices and then render payment to the vendor11 SOD11_PO_GR Enter a fictitious purchase order and enter the covering payment PLATFORM FOR GROWTH 17
  18. 18. THANKS