Problem Definition :
A manufacturing company based in India, was facing uncertainity in its business due to accounting errors and limited knowledge in forecasting its future business due to absence of any statistical or analytical tools. The client approached Align Associate to come up with a solution for better risk management in their business.
Align Associate’s knowledge of business standards, best practices, key performance metrics were used to assess the problem. A team of experts from finance, operations, and sector specific experts were drawn to research & identify the root cause of the problem.
From the research, it was found out that the root cause of the problem was primarily due to inability of the internal auditors of the company to audit and check accounting errors on a real time basis. It was observed that identification of fraudulent accounting transactions and other accounting errors were done only at the end of every business quarter and not on a regular basis. This way, the client was exposed to huge financial risks that could negatively impact their future business if proper risk management practices were not put in place.
Team members at Align Associate had to spend sufficient time to assess the problem in detail. It was found out that multiple accounting errors such as over purchases, duplicate payments, non verified transactions, payment rate mismatches, purchased items actually not required for business were overlooked during the client’s existing internal audit process controls thereby increasing their overall costs. Once identified Align Associate worked towards putting in a comprehensive solution.
To address this issue, Align Associate had recommended the client to utilize its proprietary governance, risk and compliance tool – “AuditBots” which runs on ERP Systems such as SAP and Oracle, for real time monitoring of accounting transactions.
Various risk libraries were created for different type of accounting risks. An algorithm was created for every risk library and these algorithms were run across millions of accounting transactions on a real time basis to analyse data and spot patterns. If there were any exceptions, the system would identify and throw errors.
AuditBots tool was adopted by the client after realizing its numerous advantages. The client was able to closely monitor accounting transactions on a real time basis using AuditBots tool.
Challenges Faced :
Accounting frauds can bring down a company into disrepute and in worst cases, companies can even go bankrupt due to lack of faith among key valuable clients thereby resulting in loss of reputation and business. The client wanted to uphold its corporate image by following ethical business practices and values, and wanted to avoid this unexpected situation at all costs.
This prompted team members at Align Associate to identify all the accounting risks from all angles which could occur in their business and take necessary measures to prevent these errors for better risk management in future. They had to deep dive into the data and through sophisticated data analytic tools, identify multiple ways in which the company can be defrauded which was an extremely challenging task and required high intellectual and business acumen.
Further, team members at Align Associate, initially using the client’s existing internal audit controls, took painstaking efforts to check millions of accounting transactions, which was a time consuming process for spotting various accounting errors.
Extreme attention to detail was required to identify ghost employees, cash leakages and dummy vendors.
They had to literally put themselves into the fraudsters shoes and have a keen eye to identify fraudulent accounting transactions and expose malpractices of fraudsters. These claims need to be valid and proved in order to coerce and remove fraudsters from the company by making them admit to their mistakes.
The client realized the importance of better risk management using AuditBots on a real time basis. Business derived significant benefits with the help of AuditBots include:
• Prevention of Accounting Errors on a real time basis
• Reduction in Internal Audit process time using stringent financial controls
• Reduction of costs by avoiding undesirable expenditure
• Improvement in financial results
• Increase in bottom line performance
• Tackle segregation of duties issue where multiple internal company employees conspire and collude
together in committing accounting frauds.
• Identify ghost employees, cash leakages and dummy vendors
• Plugs all loopholes to override control procedures designed to check fraud.
Please contact Align Associate for exploring possibilities of providing your organization similar support.
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