Evolution Of The Internal Audit Function From Controls

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Evolution Of The Internal Audit Function: From Controls Testing To Corporate Performance Management Insight

Evolution Of The Internal Audit Function: From Controls Testing To Corporate Performance Management Insight © Greenlight Technologies. All rights reserved. 1

Agenda § § Evolving mandate for audit & business requirements Business controls auditing/monitoring maturity

Agenda § § Evolving mandate for audit & business requirements Business controls auditing/monitoring maturity model Importance of real-time controls monitoring Q&A © Greenlight Technologies. All rights reserved. 2

New Audit Mandate – Business Control Monitoring Source: Pw. C State of Internal Audit

New Audit Mandate – Business Control Monitoring Source: Pw. C State of Internal Audit 2012 © Greenlight Technologies. All rights reserved. 3

Audit Plans Map To Key Business Concerns Source: IIA Pulse of the Profession 3

Audit Plans Map To Key Business Concerns Source: IIA Pulse of the Profession 3 -12 © Greenlight Technologies. All rights reserved. 4

Must Provide Transparency To Business Activities Source: Compliance Week & Pw. C State of

Must Provide Transparency To Business Activities Source: Compliance Week & Pw. C State of Compliance Survey 2012 © Greenlight Technologies. All rights reserved. 5

Maturity Model For Business Controls Auditing/Monitoring © Greenlight Technologies. All rights reserved. 6

Maturity Model For Business Controls Auditing/Monitoring © Greenlight Technologies. All rights reserved. 6

Internal Audit Maturity Model Ad-Hoc Control Auditing § Limited # of samples § Point-in-time,

Internal Audit Maturity Model Ad-Hoc Control Auditing § Limited # of samples § Point-in-time, manual analysis § Timeconsuming, error-prone processes Scheduled Control Auditing § Manual data extractions § More frequent audits § Rules & algorithms used for analysis § ~ 50% audit coverage © Greenlight Technologies. All rights reserved. Continuous Control Auditing § Continuous process § Reduced overhead § Able to correlate data across complex transactions § Exceptions autodiscovered § 100% audit coverage Preventive Transaction Control Monitoring § Continuous process § Run-time transaction rules (monitoring of conditions, variables & events) § Preventive controls that stops transactions at run-time Predictive Business Activity Monitoring § KPI to KRI monitoring § Advanced data analytics § Timely notification & decision support that enables the business to course correct § Provides continuous business assurance 7

Level 1 Business Control Maturity - Detective Driver Compliance (period-based) Goal Check-in-the-box (prescriptive risk

Level 1 Business Control Maturity - Detective Driver Compliance (period-based) Goal Check-in-the-box (prescriptive risk management) Control Classification Period-based control testing & reporting Audit Design control (to mandate requirement), test & report Value Required (considered a sunk-cost to the business) Measurement Pass/fail (historical) © Greenlight Technologies. All rights reserved. 8

Level 2 Business Control Maturity - Preventative Driver Goal Risk management (real-time event-driven rule

Level 2 Business Control Maturity - Preventative Driver Goal Risk management (real-time event-driven rule analysis) Enable business to respond (minimize loss, lagging indicator of failure) Control Classification Continuous monitoring (real-time action) Audit Design control (with business) & risk event analysis (automated control that business monitors, decision support for risk mitigation) Value Alerted (suggested remediation/mitigation actions) Measurement Threshold +/- pass/fail (actual) © Greenlight Technologies. All rights reserved. 9

Level 3 Business Control Maturity - Predictive Driver Dynamic business activity monitoring for Corporate

Level 3 Business Control Maturity - Predictive Driver Dynamic business activity monitoring for Corporate Performance Management Goal Enables business to change outcome (leading indicator of success or failure) Control Classification Continuous monitoring (real-time action) Audit Design control (with business), KPI/KRI monitoring & analysis to project forward-looking outcomes Value Informed (decision support that drives corrective actions) Measurement Threshold +/- pass/fail (future), associative intelligence © Greenlight Technologies. All rights reserved. 10

Importance Of Real-Time Controls Monitoring © Greenlight Technologies. All rights reserved. 11

Importance Of Real-Time Controls Monitoring © Greenlight Technologies. All rights reserved. 11

Importance Of Real-Time Control Monitoring Traditional Batch Transaction Data Analysis Multiple Steps: Traditional 1.

Importance Of Real-Time Control Monitoring Traditional Batch Transaction Data Analysis Multiple Steps: Traditional 1. Identify sample of cargo sales 2. Identify term changes made to cargo customers. 3. Combine both results to inspect cargo customer sales Single System Customer system Shortcoming: Limited sources Data latency Period-based Result Shortcoming: Manual, point-in-time analysis, false/positives & cost Automated Transactional Data Analysis Advanced Single Automated Step 1. Were cargo customer terms adjusted? 2. Are there any cargo items that might be out of the ordinary? 3. Were the customer contract terms changed, and revenue related transactions which might be considered suspicious? Advantage: More comprehensive © Greenlight Technologies. All rights reserved. Multiple Systems 1. 2. Result 3. 1. Cargo System 2. Customer System 3. Revenue System Advantage: Correlation across multiple sources and events in real-time Detailed Analysis Reports generated Advantage: Automated, consistent & 100% coverage

Q&A © Greenlight Technologies. All rights reserved. 13

Q&A © Greenlight Technologies. All rights reserved. 13

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