Using ACL For Journal Entry Analysis

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1 Using ACL For Journal Entry Analysis Christine Pedroli Supervisor Advisory Services 6 CityPlace Drive, Suite 900 St. Louis, Missouri

2 AGENDA St. Louis User Group Housekeeping Items Using a Form to Perform Analysis Ledger Analytics Analysis Results - 2 of 18 -

St. Louis User Group Housekeeping Items Feedback on 2014 Meetings and Training Ideas for Training Topics Analysis Area Specific (e.g. T&E, Pcard, FCPA, etc.

3 St. Louis User Group Housekeeping Items Feedback on 2014 Meetings and Training Ideas for Training Topics Analysis Area Specific (e.g. T&E, Pcard, FCPA, etc.) Continuous Monitoring Scripting Ideas for Meeting Topics How do you use ACL? ACL products Presenting Analysis Results Volunteers for Meeting Presentations - 3 of 18 -

Using a Form to Perform Analysis Identify key input for analysis (rules and expectations) Dates Accounts People Data relationships Create a user friendly form and

4 Using a Form to Perform Analysis Identify key input for analysis (rules and expectations) Dates Accounts People Data relationships Create a user friendly form and control form Provide explanations/definitions for all input items Utilize editing controls wherever possible Pull import data into a control form for import - 4 of 18 -

5 Form Example 2

6 Ledger Analytics 1. Verify completeness of the ledger 2. Identify entries posted on holidays 3. Identify entries posted outside the audit year 4. Analyze the j/e description for: Related parties Parties of interest Unusual terms Blanks - 6 of 18 -

7 Ledger Analytics 5. Top 25 entries 6. Identify entries to unusual/high risk accounts 7. Identify manual entries 8. Outlier entries 9. Average and Total activity/value by account by month - 7 of 18 -

8 Ledger Analytics Completeness (#1) Identify Balance Sheet v. Income Statement accounts FORM INPUT (account number ranges) Import PY ending balance for all BS accounts Import CY ending balance data for all accounts (this may be in GL already for some data sets) Calculate activity for CY from GL data for all accounts Recalculate ending balance, compare recalculated to imported ending balance data and identify incomplete accounts - 8 of 18 -

9 Ledger Analytics J/E s on Holidays (#2) Identify Holidays FORM INPUT (dates) Compare entry date to holiday dates JOIN on entry date from GL to form input table - 9 of 18 -

10 Ledger Analytics J/E s Outside Year (#3) Identify date range for audit year FORM INPUT (dates) EXTRACT IF NOT BETWEEN(j/e date field, beginning date, end date) - 10 of 18 -

11 Ledger Analytics Description Analysis (#4) Related Parties/Parties of Interest/Unusual Terms FORM INPUT (names and keywords) JOIN on description from GL to form input table, or EXTRACT RECORD IF FIND(form input field, in j/e description field) Blanks EXTRACT RECORD IF ISBLANK(j/e description field) - 11 of 18 -

Ledger Analytics Top 25 & Unusual Accts Top 25 (#5): Calculate absolute value of debit/credit SORT and EXTRACT top 25 Unusual/High risk Accounts (#6): FORM INPUT (account

12 Ledger Analytics Top 25 & Unusual Accts Top 25 (#5): Calculate absolute value of debit/credit SORT and EXTRACT top 25 Unusual/High risk Accounts (#6): FORM INPUT (account numbers/names) JOIN on account number/name from GL to form input table Additional stipulations can be added to only identify if it is a debit or credit to the account - 12 of 18 -

13 Ledger Analytics Manual Entries (#7) Identify j/e sources that are used for manual entries FORM INPUT (manual identifier) Compare j/e source to form input JOIN on j/e source from GL to form input table Additional considerations to scope results Amount limitations (expect small or large to be unusual?) Time stamp limitations Account specifics (accounts that should never, or always have manual entries) - 13 of 18 -

14 Ledger Analytics Outliers (#8) Summarize GL data by account number Run standard deviation for each account Extract all outliers (more than 5 x s ) Additional considerations Account expectations Do certain accounts always have consistent or volatile activity by nature? - 14 of 18 -

15 Ledger Analytics Trends (#9) Create month data field CMOY(j/e date, 9) Summarize on Month and Account Total activity for each month Number of entries each month Calculate average entry amount Consider analyzing debits and credits separately - 15 of 18 -

16 Analysis Results Summarize results into English JOIN back for entire entry If exporting, be sure to format dates and amounts, and add filters to data headers Consider if additional analysis filters will add value to results Consider graphs for presentation Trends (line graph) Outliers/Manual Entries (scatter graph) - 16 of 18 -

17 Sample Analysis Summary JE_ANALYSIS_RESULTS_SUMMARY YES, 55 records were part of journal entries that were made on a holiday. Go to JE_On_Holidays. No records were part of journal entries outside of requested journal entry date range. No records were part of journal entries that have a related party in the description column(s). YES, 491 records were part of journal entries that have an unusual word in the description column(s). Go to JE_With_Unusual_Words. No records were part of journal entries that have a blank description. YES, 2 IDs were identified as entering/creating JEs. Go to JE_Created_By. YES, 88 records were noted to indicate gaps in journal entry file. Go to JE_Gaps. No records were part of journal entries that have a duplicate unique ID. YES, 337 records were part of journal entries that have a line greater than or equal to ISI. Go to JE_With_Signif_Line. YES, 94 records were identified with a debit or credit in excess of two times the standard deviation of entires to that GL Account. Go to JE_Outliers. YES, 12 accounts were identified with ledger activity but no relating trial balance account. Go to JE_No_TB_Acct. YES, 37 accounts were identified with missing activity in the general ledger. Go to JE_IncompleteAcct. YES, 250 records were part of manual journal entries that adjusted Cash. Go to JE_Manual_Cash. No records were part of manual journal entries that adjusted Receivable. No records were part of manual journal entries that adjusted Inventory. YES, 727 records were part of manual journal entries that adjusted Other_Asset. Go to JE_Manual_Other_Asset. No records were part of manual journal entries that adjusted Land. YES, 542 records were part of manual journal entries that adjusted Payable. Go to JE_Manual_Payable. YES, 73 records were part of manual journal entries that adjusted Owners_Equity. Go to JE_Manual_Owners_Equity. YES, 72 records were part of manual journal entries that adjusted Revenue. Go to JE_Manual_Revenue. YES, 1,174 records were part of manual journal entries that adjusted Cost_of_Sales. Go to JE_Manual_Cost_of_Sales. - 17of 18 -

Questions? Christine Pedroli Supervisor Advisory Services cpedroli@bswllc.

18 Questions? Christine Pedroli Supervisor Advisory Services 6 CityPlace Drive, Suite 900 St. Louis, Missouri

Leveraging Data Analytics to Expand Audit Coverage and Add Organizational Value

Leveraging Data Analytics to Expand Audit Coverage and Add Organizational Value Clint McPherson Managing Director, Dallas, TX Cindy Hart Manager, Dallas, TX Setting the Stage - Data Analysis Defined Data