financial accounting advisory services...using automation and analytics to transform financial...

Financial Accounting Advisory Services Advanced process assurance and data analytics May 2013

Advanced process assurance and data analytics

Agenda

About EY 3

Advanced process assurance and data analytics 6

Appendix 16

Credentials 18

Contacts 19


About EY


EMEIA Sub-areas

EY Global

Countries worldwide

140

Employees worldwide

167,000

US$ revenue (2011-12)

24.4b

Africa Angola, Botswana, Republic of Congo, Equatorial Guinea, Ethiopia, Gabon, Ghana, Guinea, Ivory Coast, Kenya, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Nigeria, Rwanda, Senegal, Seychelles, South Africa, Tanzania, Uganda, Zambia, Zimbabwe

Belgium and Netherlands

Germany, Switzerland and Austria

Commonwealth of Independent States Azerbaijan, Belarus, Georgia, Kazakhstan, Russia, Ukraine, Uzbekistan

Central and Southeast Europe Albania, Bulgaria, Croatia, Cyprus, Czech Republic, Estonia, Greece, Hungary, Latvia, Lithuania, FYR of Macedonia, Malta, Moldova, Poland, Romania, Serbia, Slovakia, Slovenia, Turkey

France, Maghreb and Luxembourg France, Luxembourg, Algeria, Morocco, Tunisia

Financial Services Organizations Belgium, Channel Islands, France, Germany, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Switzerland, UK

India

London

Mediterranean Italy, Portugal, Spain

Middle East and North Africa Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Oman, Pakistan, Palestinian Authority, Qatar, Saudi Arabia, Syria, United Arab Emirates

Nordics Denmark, Finland, Norway, Iceland, Sweden

UK and Ireland UK, Isle of Man, Republic of Ireland


Using automation and analytics to transform financial process assurance


Key questions for stakeholders

Top-performing companies leverage data analytics to guide future strategies and daily operations more often than low performers.

How to reach the next stage of reliable management oversight

Assurance liability

productivity Internal audit

Departments

Management

Information technology

Board

Efficient process

monitoring?

Does anyone want more

data?

Fraud within the

organization?

Degree of assurance?

Effective controls!

What’s next?


Client issues and value proposition

Advanced process assurance and data analytics helps clients to use their existing data to increase process assurance, while reducing costs and ensuring effective monitoring.

Insufficient process assurance

► Internal monitoring functions (e.g., internal audit) are not able to cover all relevant internal processes.

► Uncertainty of clients about findings or control testing results as part of financial statement audit.

Inefficient control methods and increasing cost pressure

► Only random testing of controls and processes are possible, due to lack of resources.

► Full, company-wide process level controls are not feasible, due to cost.

Limited added value from available data

► Fragmented IT infrastructure is generating a variety of data, which is only partially used for analysis.

► Amount and complexity of internal processes or IT systems is increasing. ► Process weaknesses are detected unsystematically.

Minimize liability threat of boards

► Unsystematic or basic monitoring of effectiveness through boards. ► Inefficient data-collection process for monitoring tasks by management

or boards.

Enhanced process assurance

Efficient controls

Value-added data

Effective monitoring


Framework and client benefits

► Advanced process assurance and data analytics is embedded into the corporate governance of an organization. Our framework contains four key steps.

Business processes

Board

Advanced process

assurance and data analytics

Company culture

Company structure Management

Optimizing control and analysis procedures for essential and

critical processes

Increasing process assurance and less findings

Considering large transaction and data volumes

for process monitoring

Added value by using existing data

1

2

Establishing real-time reporting for control processes

Continuous monitoring of effectiveness

Automation of control methods and usage of advanced data

analytics

Efficient control methods and cost reduction

4

3


Solution elements

► We are able to tailor our solution to every stage of your control environment maturity. The optimization of individual controls, in combination with an overall streamlining of the control portfolio through data analytics, will provide the maximum additional value.


Advanced process assurance Data analytics

► Optimize single controls ► Analyze critical processes and transactions ► Automate manually performed control activities ► Establish IT-enabled findings-workflow ► Implement dashboards for process monitoring and

reporting

► Analyze portfolio of controls ► Optimize company level controls ► Develop non-trivial expectation space ► Ongoing data collection and execution of control

portfolio ► Sophisticated controls analysis and reporting

Offe

ring

Exa

mpl

es ► Avoid duplicate payments

► Minimize purchase process irregularities ► Improve customer terms and conditions control ► Avoid shortage or overrun of IT licenses

► Run expectation space and controls portfolio on: ► Revenues, trade receivables and inventories over

time, products and segments, interest, trading, commission-income over time, financial instruments and segments


Advanced process assurance – maturity levels

► APA increases the efficiency of controls and enhances the reliability of processes. Thus, it improves the effectiveness of the entire internal control system

► A key component of APA is the predominant automation of underlying control activities

► Therefore, structured data from different IT systems are combined via a rule set

► APA is not an IT system, it is a methodology that is applicable to all available, structured company data

Sustainable automation of controls

Workflow-based control and process monitoring

Monitoring of effectiveness via dashboard

Leverage for ad hoc issue analysis

Usable for continuous (internal) auditing

► Increasing process assurance

► Cost reduction for issue management

► Efficient control performance

► Increasing efficiency of controls and process monitoring

► Transparency and effectiveness of controls and processes

► Continuous monitoring of effectiveness

► Facilitate performance of financial statement audit

Optimized control performance and monitoring

Streamlined process monitoring and oversight

Simplified information access

Advanced process assurance (APA)

Efficiency

Maturity levels


Data analytics – concept

Expectation space calculator

► Calculates expected values in different dimensions: ► P&L and financial statement positions, product, value,

time, etc.

Current data calculator

► Collects the actual data in the defined dimensions and calculates the respective measures

► Calculation of the time-expectation graph:

► Calculation of the time-performance graph:

Control portfolio analyzer

► Compare the time-expectation graph with the time-performance graph via pattern matching and stochastic methods ► Covariance matrices, Bayesian networks, neural networks,

artificial intelligence and regression analysis

Revenues

Val

ue

Time

Receivables

Val

ue

Time

Inventories

Val

ue

Time

Revenues

Val

ue

Time

Receivables

Val

ue

Time

Inventories

Val

ue

Time

Moment

Val

ue

Balance sheet item

Moment

Val

ue

Balance sheet item

Dat

a co

llect

or

Moment V

alue

Balance sheet item


Project approach

► Our advanced process assurance and data analytics project approach is designed to support your business case, streamline process monitoring and simplify management oversight.

The “diagnose” and “design” phase of the project approach are critical to the success of advanced process assurance and data analytics.

Identify Diagnose Design Deliver Sustain

Scope As-is analysis Data model and testing Roll out Recurring

operation

Project objective

Analytics scope

Risk and process

Methods and options

Automa- tion and analytics

Workflow

Reporting Technical rollout

Training and awareness

Technical support

Continuous improvement

Project management

Change management


Key project steps, tools and enablers

Diagnose phase

As-is analysis

Risk and process Methods and options

Conducting process and risk analysis Analyzing methods and automation opportunities

► Workshop with key stakeholders, experts and departments to discuss current state of process risk and future state vision

► Interviews with identified experts to gain perspective and profile of existing control environment, analytic methods and first analysis of optimization and automation potentials


Key project steps, tools and enablers (contd)

Design phase

Data model and testing

Automation and analytics Workflow

Developing methods for advanced analytics and control automation

Designing monitoring workflow

► Design advanced rule set for control automation

► Design advanced data analytics for a whole control portfolio

► Design continuous monitoring workflow on applied control automation and portfolio and data analytics at functional level

Reporting

Designing and developing reporting and dashboard

► Design and development of reporting structures and dashboard for relevant stakeholders


Pre-project dialogue

Quick scan ► Exposure of process issues and transaction failures: which tracking methods are in place? ► Organization of process oversight: how, and to what extent, is information provided to management? ► Overload of data: does the data provided enable fast monitoring of processes? ► Resource allocation for control purposes: are suitable capacities for process oversight available? ► Control portfolio: is the interconnection of individual controls considered while assessing effectiveness? ► Efficiency of controls: are there a large number of manual control activities? ► Control methods: are applied methods state of the art?

Strategic road map ► Analyze options for the client business case ► Align expectation of and benefit for key stakeholders ► Collect specific data and individual client metrics ► Discuss business case with the client ► Develop overall potential with the client ► Create control portfolio and benefit roadmap

Look and feel ► Discuss options for implementation and results, e.g.,:

► Control automation and data analytics examples ► Multiple-user showcase based on a sample corporation ► Demonstration of possible advanced process

assurance and data analytics workflow ► Conclude with client on specific feasibility

Business case workshop

Showcase

What needs to be considered?

What are the benefits?

What does it look like?

Appendix


Credentials

Client Country Sector or industry Service description

Non-listed financial institute

Germany Banking and capital markets

EY supported the accounting department of the client during the implementation of an integrated internal controls system, including advanced control methods. Therefore, different processes were analyzed, and a functional and consistent model was defined. EY supported all stages of the implementation project, starting with as-is analysis, definitions up to test planning and test conduction.

Listed oil and gas operations company

United Kingdom

Oil and gas operations

EY supported the client with the analysis and identification of control deficiencies within a full population of transactions. Analytical tests and procedures were performed to identify exceptions. We helped the client to establish follow-up activities. EY also designed and developed a reporting for the observed findings.

Listed automotive and industrial engineering company

Germany Automotive EY supported the implementation of IT controls (definition, description and coaching), the development of a controls manual and the specification catalogue for automated controls monitoring.


Financial Accounting Advisory Services contacts – EMEIA

Dr. Detmar Ordemann Partner [email protected] + 49 711 9881 15438

Marc Grötzner Executive Director [email protected] + 49 211 9352 16279

EY | Assurance | Tax | Transactions | Advisory About EY

EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. © 2013 EYGM Limited. All Rights Reserved. EYG no. AU1785

EMEIA Marketing Agency 1000307 ED None This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice. ey.com

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