Process mining tools provide new insights
Reducing our audit risk generally starts with gathering detailed information on the administrative organization of the companies we audit, including the way they are organized, and how their processes internal control system is built. The International Standards on Auditing require at a minimum that an auditor is able to understand and describe the internal control environment and evaluates its design effectiveness. However, a financial year spans a massive amount of individual transactions, and using traditional means, we are incapable of testing them all. That is why auditors traditionally had to fall back on random sampling, to take only a sample out of a given set of transactions and to extrapolate the findings on this sample testing to the entire population.
Data analytics, however, allow us to scan an entire population of transactions and to highlight exactly “what went wrong” based on the data trail, little breadcrumbs so to speak, that people and applications leave behind in IT systems when processing transactions. No more random sampling and no more extrapolation, but a targeted control of all transactions and an identification of all exceptions.
As such, we are gradually evolving into an audit based on process mining techniques. Process mining software collects and structures those data breadcrumbs and translates them into valuable insights about a company’s processes. Process mining typically reveals that a company’s processes are much more complex than initially assumed and that they deviate far more from the textbook process as set up in the first place.
Process mining as a result provides us with new insights and contributes to the added value of the audit.