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21/1/2011 European Court of Auditors Chamber IV
Techniques for risk-based auditingDG INFSO-02 Freddy Dezeure - Charles Macmillan
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Background DG INFSO
European Commission department
European Digital Agenda
Co-funding of cost of research projects: 1,5 bio€ per year
FP6, FP7, eTEN, CIP: > 7000 beneficiaries, >2000 projects
Financial audits - 200 per year
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Selection of auditees
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Assurance audits -> error 4%
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P1
P1
Major sources of errors
Excessive overheads
Claimed salary cost not actual
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Representative error rate
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Risk-based auditing
Risk of intentional inflation of cost
Assessment of the organisation as a whole
Data mining – new tools and methods
Audit programme specific to the risk (ISA240 - ISA315)
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CM
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Data gathering
Risk assessment
Define approach
Field work
Assess next steps
Finalise
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Data gatheringRisk
assessment
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Data Gathering phase
Scope from risk assessment – continually reassessed
Collect available information from internal and external sources
Check for indicators and inconsistencies
Outcomes define specific audit procedures
Use and find new Indicators
Feed into control systems
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Internal Sources
Project documents: proposal, description of work, deliverables, reports, reviews, emails, cost claims
Experts Database
Organisations Database
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Open Sources
People Companies Communications
Google, BingGoogle Scholar, Microsoft AcademicMicrosoft EntityCubeLinkedIn, Zoominfo123People, Yasni, PIPLGoogle Magic Wheel, Timeline
Google, BingCompany registriesGoogle Maps Google Streetview
Google, BingInfobelIxquickUKPhonebookDomaintoolsDomaincrawlerRobtexWayback Machine
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Find the right person
Find all the relevant information about the person
Avoid noise
Finding people
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“Fake” People - Examples
Non-existent people
Existing, but
not relevant
not employed
not aware of project
People in multiple roles / companies / projects
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Neuron – partner in BRAIN
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Neuron: Key staff
• DoW Description
• Computer Science degree
• Experienced ICT researcher
• etc
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Neuron – Key staff
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Neuron – Key staff
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Indicators
Not found on internet
Top management of company
Always the same names
Listed for different companies in different projects
Listed in a different country from the company
CV on LinkedIn contradicts submission
Anonymous email address (gmail, ...)
GSM phone only
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Finding companies
Find the right company
Find all the relevant information about the company
Avoid noise
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Even simple tools can help
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Earth Match – partner in SOLARSYS
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Earth Match – partner in SOLARSYS
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www.cabbage.com
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ONION – partner in VEGETABLE
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• Does the website exist?
• Does the project fit the company’s core activities?
• Does the website give contact information - and does it match the official transmission documents?
• Is the website registered by the partner?
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Company website
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• Company registration websites
http://www.rba.co.uk/sources/registers.htm
• http://www.infobel.com/, http://www.ixquick.com/
– Cross-check the phone number with yellow/white pages
– Reverse search on the phone number
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Company registry, phone/fax
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• Website registration
http://www.domaintools.com/
http://www.robtex.com/dns/
• Archive
http://www.waybackmachine.org/
http://www.archive.org/web/web.php
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Company website, history
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• Search for company in Google
– Not reassuring if nothing found
• Translation tools
– http://translate.google.com
– http://babelfish.yahoo.com/
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Tools - internet search
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HOUR – partner in TIME
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• Email address not <-> company domain
• Phone number = fax number
• Phone number = gsm number
• Website registered by another company
• Website or phone numbers in another country
• Corporate website without contact coordinates, “under construction”
Indicators
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FD
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Data Gathering Outcomes
Organisation
Cannot (financially)
Cannot (operationally)
Can do / have not
Staff
Have not done
Have done, cost inflated
Have done, cost ineligible
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Outcome - Audit Procedures
Cannot (financial)
Find other income source
Check commercial agreements with others...
Cannot (operational)
Find who could have done the work
Verify working agreements / CVs / job descriptions...
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Risk-based audits -> error 30%
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Impact on DG INFSO
Huge effort in administrative follow-up
Litigation (EDPS, Ombudsman, TPI, ECJ)
Impossibility to recover funds
Waste of budget - impact on genuine participants
Reputation damage
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Perception
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Challenge
Detect problems early in the project life-cycle (PO)
Link data gathering/risk-assessment/audit programme
Manage exceptions well
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Implementation of audits
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Residual error
AuditedError = 0
ExtrapolatedError = non-systematic
UntouchedError = representative
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Selectiveness
FacilitateSimplify
Trust
DetectCorrectPrevent