How Will Continuous Auditing and XBRL-GL Work Together to Provide Improved Business Value? Nigel J. R. Matthews, BASc, CA ACL Services Ltd.

There are many pervasive [information] supply chain problems that exist today due to the lack of an open information standard and proprietary formats….XBRL enhances the work of internal auditors by addressing these information problems and enabling them to do more at a lower cost. Mike Willis PricewaterhouseCoopers Internal Auditor Magazine, October 2007

Audit Software XBRL 1990s XML 1.0 becomes W3C recommendation XBRL Reporting Schema 2.1 Mainframe based query and reporting tools Creation of PC spreadsheets Introduction of purpose- built Audit technologies (CAATS) Continuous Controls Monitoring Applications Re-emergence of Continuous Auditing ACL Imports Complex XML ACL Imports XBRL reporting schema 2.1 XBRL 1.0 XBRL 2.0 Reporting Schema XBRL-GL Schema 2.1 released Audit Analytics Server Solutions ACL imports simple XML data s

Provides the ability to:  Notify the organization when errors that impact financial performance have occurred  Ensures adherence to internal policies and external requirements to stakeholders  Determines transaction validity, accuracy and appropriateness on a transaction by transaction basis  The only audit approach that makes sense in the face of massive transaction volumes generated by today’s businesses. The truth is in the transactions

There are three types of controls within the enterprise: 1.Manual 2.Automated 3.Combination Percent of Controls Covered Automated Application Settings (32%) Manual (23%) Combination (45%) Covered by transaction monitoring Covered by IT/ System controls monitoring

Controls & Compliance Rules Historical and statistical transactional profiling Transaction Monitoring System Controls Findings Alerts Financial & Business Unit Managers & Audit Management & Audit Action Immediate notification of critical exposures Investigations, recoveries, and improved controls and procedures Test transactional data against established internal control rules (COSO-based) and transactional profiles Data Transactions detailed for further analysis Transactional Data Greatest Challenge is Data Access

Continuous Monitoring/Auditing XBRL-GL General Ledger Inventory Receivables Payables Accurate financial reports for Investors, Regulators, and Management

 Both continuous auditing and monitoring working together in the organization  Testing system controls and financial transactions to ensure effective compliance with regulatory and internal controls  Create assurance that all the data flowing through the systems is accurate before being entered in the financial statements  Where ever possible use XBRL-GL formatted data as the mechanism to reliably consolidate & evaluate business transactions through the general ledger

 Today Continuous Auditing/Monitoring is a reality but there are still challenges in the financial reporting supply chain  These challenges mean that extensive manual audit and reconciliation procedures are required  XBRL-GL can bridge that gap and make the roll-up of audited data into the financial statements a faster, more efficient process  Outcomes: less opportunity for errors, less re-work, improved efficiency

 XBRL-GL allows auditors to pull information from disparate systems in standardized format  Aim is achieve near real-time access to data and immediacy of relevant audited business information  Result is a simplified audit process that allows auditors to review more data in detail, more frequently The auditor should evaluate the data not spend time on conversion issues

Early Adopters

 Recovering from previous high-profile accounting scandal  Wanted to Continuously Audit transactions from HR, payroll,suppliers and accounts payable  Found $17 million in duplicate payments in one year  Identified billing errors on 16,000 units of equipment  Reduced SOX 404 compliance costs

 Continuous Auditing of transactions provided immediate ROI  Wanted to move beyond random sampling and gain full coverage of its 500,000 monthly transactions  Chose ACL solutions to assess risk and detect fraud saving over 10,000 hours of manual staff labor  Reduced commission expense by $750,000 annually and pinpointed cases of fraud