Process-level automation — also known as hyperautomation — involves the orchestrated use of multiple technologies to automate as many business and IT processes as possible. According to predictions from Gartner, McKinsey, and Deloitte, hyperautomation is one of the top technology trends of 2022.
In our Internal Audit Hyperautomation Blueprint Series, we explore examples of business processes typically selected for SOX and internal audit testing that contain many opportunities for hyperautomation. Download your free copy of our first whitepaper in this series — which explores opportunities in the purchasing and payable lifecycle — and read on below for an overview of how to incorporate RPA, Advanced Analytics, Data Visualizations, and API/IPaaS in purchasing and payables, including:
- Discovery Analytics/Data Profiling.
- ICFR Automated Evidence Collection, Testing, and Data Visualization. Procedures.
- Fraud Techniques.
Purchasing and Payables Process Overview
Purchasing and payables is a frequently audited business process, one that auditors have long sought to create efficiencies in. With the exception of the payroll process, the accounts payable process accounts for the largest proportion of spend at most organizations. Accounts payable performance has a direct bearing on:
- Fraud risk management.
- Working capital.
- Operating cost.
- Supply chain risk and operating efficiencies.
Further, it can be fraught with complexity due to the high volume of transactions, multiple integrated systems, banks, and payment types — leading to an increase in opportunity and incentive for fraud. The following are three groups of automation areas in the purchasing and payables lifecycle: Discovery Analytics/Data Profiling, ICFR Procedures, and Fraud Techniques. For each of these groups, we’ve included an excerpt from a larger list of example procedures — found when you download the full eBook — that can be used to implement automation in that category.
Overview of Systems and Data Files Typical to Accounts Payable
The following is an overview of the systems and data files used across the accounts payable lifecycles.
Common Systems Used to Process Accounts Payable Transactions
- Core ERP accounts payable module e.g., SAP, Oracle Financials, Netsuite
- Specialized AP automation systems e.g., Coupa, AvidExchange
- Banking payment and positive pay systems
Source Data/Input Files Used in Automation Procedures
- Supplier/vendor master file
- Purchasing agreements/supplier contracts
- Employee master file
- Labor and processing cost data
- Log of vendor master file changes
- Accounts payable detailed transaction history for the specified period
- Accounts payable aging report
- Useful third-party data (see Appendix A)
Example A: Discovery Analytics/Data Profiling
Leveraging your accounts payable function’s existing dashboards, analytics, or technologies — like process mining — can provide valuable insights into transaction processing volumes, trends, error rates, and opportunities for efficiency. If your accounts payable function has not conducted transformational initiatives like spend analysis and automation, you will likely identify significant value-add observations by conducting your own discovery analysis. The following is an example procedure you can use to help understand the business process, uncover insights, and substantiate the objectives and focus of your audit.
Example B: ICFR Automated Evidence Collection, Testing, and Data Visualization Procedures
Traditional accounts payable cycle internal control testing procedures offer an array of opportunities to leverage technology to improve coverage, accuracy, and efficiency. By pursuing continuous auditing through automating evidence collection and suitable testing procedures, audit teams are empowered to focus their resources on higher-value tasks, reducing audit fatigue and ultimately transforming their processes by eliminating non-value-add manual tasks. The following is an example of using automation in your ICFR coverage.
Table C: Fraud Techniques
According to the 2020 ACFE Report to the Nations, accounts payable billing schemes are the most common form of asset misappropriation and cause a high median loss, making this type of fraud a particularly significant risk. The average median loss from a billing scheme is $100,000 and these schemes persist for 24 months on average before detection. As audit teams embrace transformational technologies to help increase the effectiveness and coverage of their audit and fraud procedures, we will likely see a reduction in detection times and an increase in the internal audit detection percentage rate.
The following is an example of how internal audit teams may leverage hyperautomation technologies to help detect accounts payable fraud schemes.
Download the Full Internal Audit Hyperautomation Blueprint Guide
For a deeper dive into the most impactful automation opportunities across the purchasing and payables lifecycle, download the full guide: Internal Audit Hyperautomation Blueprint: Purchasing and Payables. Stay tuned for further installments of our Internal Audit and Hyperautomation Blueprint Series that will explore opportunities across other SOX and audit business processes.