The new year of 2020 has taken off, starting a decade of innovations we previously couldn’t think of. Technological global breakthrough is a no-brainer and is here to stay. This year it’s time to change our mentality and move towards working more efficiently – process mining will become a must have for successful enterprises.
What used to be “beyond the mind” is now a goal. Expanding process mining to audit and rewriting the planning and audit approach can change the way businesses operate once and for all.
What do we know about auditing today?
Demand for audit
A financial audit is currently the most reliable way of independent evaluation of published company information. Certainly, it’s a complex “exam” for an organization, that aims at identifying the accuracy of processes, compliance to regulations set by the government and stakeholders, and financial statements and relevant disclosures.
The audit process has undergone many changes over the years to reach the point where it stands – it’s been studied at academic levels providing job opportunities for professionals, it is the main source of income for the Big Four and a must-have for many organizations at internal and external levels.
Audit check-ups are performed periodically, often per year, but it’s especially crucial to have an audit overview of the company’s finance when facing investment opportunities, expansion or any big event bringing significant changes for business.
Internal vs External audit
Speaking of two types of audit: willing to “pass” an audit check from outside, a company shall establish an internal auditing system that allows financial processes and prevent risks before an external auditor comes in. For this, a financial department establishes a system focusing on:
- monitoring factors affecting business performance
- identifying discrepancies, errors, misuse
- predicting potential risks and addressing these at the earliest stage possible.
In comparison to the external audit, an internal audit allows the company to react fast, on top of strategic decisions. And this is, we believe, where process mining can save millions (of hours/dollars/stressful nights).
Seeking to evaluate the company’s compliance to standards, either finance or law-related, an auditor would request access to the underlying documents, conduct interviews with key employees to understand the processes and come up with suggestions and findings, also stating issues that stayed unresolved.
In this traditional approach, an audit is taken as a serious project, taking a good part of employees’ time – it costs money and effort of both parties. Auditors should inflict minimal disruption to an organization’s work process, yet it does happen as employees start to feel the rush of “The Audit”.
Additionally, since the nature of traditional audit procedures relies mostly on information employees provide, it faces challenges that are the key focus for improvement:
- Getting the big picture of processes
- Bringing value and supportive suggestions to the business
- Gaining trust and a reliable image from publicity
- Tracking small signals of potential future risks
- Considering that actual processes tend to differ from the way people describe them.
Among the reviewed material, an auditor should consider corporate data stored in IT systems. As companies opt for technological transformation and digitalization, large data sets are stored on their premises with no actual use – this is simply too much for an auditing group to analyze using a manual approach. Therefore, data processing becomes yet another challenge for audit.
Simply imagine, with the global big data trend – how much information is being wasted, when it could be used instead to serve the needs of an auditor and save them from exhausting hours of manual investigation.
Process mining and audit
The rise of advanced process mining techniques leads to simplification of the auditor’s life and increases the quality of audit. According to Wil van der Aalst in his research together with Deloitte, he states that the presence of event logs and process mining techniques enables a new form of auditing. Rather than sampling a small set of cases, the whole process and all of its instances can be considered. (“Audit 2.0: Using process mining to support tomorrow’s auditor”)
Most importantly, the biggest advantage of process mining implementation across various industries is its enablement to analyze the real processes, instead of assumed ones. This is especially crucial for the future of audit companies as process analytics and compliance are at the core of provided services. Besides, process mining can support ROI estimates and comes in handy when an auditor is about to provide the company with Proof of Value.
Imagine having to save yourself time to perform repetitive tasks that lead to nothing. Ticking and tiering invoices is a big part of an auditor’s life. With process mining you can instantly see how a case went through the process and if it meets all the requirements it should meet based on the size, origin, and date of the case. This way sampling is no longer mandatory, discrepancies can be easily identified, and the auditor is able to interview employees about spot on quality findings.
How easy is it to implement Process Mining to the audit process?
Process mining implementation for audit includes the following main steps: technology implementation, personnel education and adjustments to existing procedures.
Process mining vendors can support the data extraction from existing IT systems and ensure its seamless connection to a process mining platform. Transformed data can be further used for process graph generation and its deep-dive analysis. In the case of ProcessGold, thanks to our experience connecting to various data storage systems and adapting the platform for audit specifics (terminology, necessary graphs, etc.), we are now able to effectively implement the platform on client’s premises or cloud.
Besides implementing the data in the right way, it’s important to make sure this data is safe and is the responsibility of the IT department. Sharpening usability of the platform, ProcessGold enables governed self-service access to data. We already mentioned this in the article on Governed Self-Service solutions. In short, this means that business analysts have access to data and can extract the necessary reports at any time independently. Thus, they are likely to be using a single source of truth bringing improvement ideas from different perspectives but based on the same actual data. At the same time, full control of data is in the hands of IT – ensuring security and privacy.
Getting ready for the future audit, it is important to get auditors on board and encourage them to change the current mentality. The change will require deep knowledge of process mining and automation platforms, their capabilities and information management. Therefore, organizations start focusing on training and development programs that would shape the teams that deliver higher quality audit.
Together with a process mining vendor, an audit team would get training on process mining adapted for their needs. Talk to our team to learn more about how ProcessGold does it.
Adjustments to current procedures
Enabled with predictive technology, the future audit will be able to predict and advise on the short-term future, rather than exclusively point at past errors. Considering automation (see part 2 of this article), time spent on the manual “box-ticking” tasks will decrease, creating space for auditors to consider more factors for evaluation. Thus, auditors can look at different companies on a more individualized level, considering their sizes, speed of growth, and specifics of the market they operate in.
In recent research conducted by PwC on the future of audit, K. Burrowes (partner of PwC UK) brings up the discussion of whether we should audit the purpose of a company, rather than its financial statements. Currently the audit focus lays on financial statements, whereas with process mining tools it is possible to see all related processes, influenced by financial, including the sub-processes and tasks. Process mining shows how a small change influences the whole business’ ecosystem. It’s this ability to see the big picture that is currently lacking for the majority of auditors, and which process mining can provide.
What benefits does Process Mining bring to audit?
- Shortens audit time.
- Reduces the time spent by clients to prepare the deliverables.
- Shows the ‘real’ process, not the intended one.
- Process Mining allows the audit to be made on a larger dataset, rather than a sample.
- Customer satisfaction. Less manual interference with their client’s internal departments, i.e. finance and inside sales.
As we can see, all audit companies may have to use process mining in the future. And yes, it is inevitable – the interest grows, and process mining no longer represents the purely scientific field – it is here to change the way people work. Speaking of which – automation is another important change awaiting audit firms. Read more on the future of audit with RPA and process mining combined in part 2 of this article!
Until then – embrace the challenge, save yourself overtime on repetitive tasks during a “busy season” and happy mining!