2011-08-01
“We’re using ACL technology to add immediate value to the bottom line while delivering more efficient and strategic audit work.”
Hélio Takashi Ito and Gilvan da Silva Magalhães, CPFL Energia
One of humanity’s greatest challenges today is to meet the demand for energy and seek energy alternatives that reduce dependence on fossil fuels. With nearly 100 years of history, CPFL Energia is a Brazilian holding company that has been doing that and expects to do more. It generates, distributes and commercialises electricity through its subsidiaries in both free and regulated Brazilian markets. With headquarters in São Paulo and almost 20 million Brazilian consumers, CPFL contributes to the sustainable development of society thanks to its substantial investments in the generation of clean and renewable energy, which represent over 90% of their generation matrix, including wind farms, hydroelectric and biomass (sugar cane) plants. CPFL also invests in research and development of electric vehicles, green transformers, restocking rivers, reforestation, and value added services, among many other initiatives that permeate the three principle fronts of their business.
CPFL’s internal audit group works independently to assess technical and operational risk, promote efficiency in corporate procedures, and audit financial records. CPFL is listed on both the NYSE and the Brazilian BM&F Bovespa stock exchange, so the team must also ensure compliance with the U.S. Sarbanes-Oxley Act (SOX) and controls enforced by the Brazilian Electricity Regulatory Agency (ANEEL).
Providing assurance that business activities comply with the company’s strategic annual plan is a key audit priority. However, the audit division was struggling to access internal data, such as plotted tables for analysis and monitoring, plus customised program documentation. Rapid corporate expansion has also created an extremely complex IT environment that includes legacy systems communicating with SAP and a new billing module.
In order to ensure regulatory compliance and support the company’s expansion, CPFL’s corporate IT division has been working to enhance internal systems, plus business and IT processes. At the same time, the internal audit group needed a way to manage growing demands on its time and resources, while providing greater assurance and risk mitigation. The audit division teamed with IT to implement ACL Analytics Exchange and achieve a continuous auditing environment. The solution fit the group’s strategic vision of an analytic-enabled audit plan with full cooperation from appropriate business areas.
The audit group began by analysing key risks associated with internal business processes and consulted stakeholders to pinpoint high-impact areas for data analysis. The team prioritised analytics that could provide the greatest return on investment in a short- and medium-term period and convey to shareholders the highest level of confidence in the company’s control environment.
After a strategic risk assessment, the audit group focused on creating analytics to test SAP system data, including Accounts Payable, Material Management and Financial Accounting modules. The ACL solution provides secure, direct access to SAP data without IT intervention. Each test runs in just 15 minutes and produces clear reports with full exception summaries. These reports are then manually shared with business area management and directors, audit and management committees, and the accounting, treasury, controller, and payment management functions.
CPFL has used ACL technology to:
The internal audit group implemented ACL’s data analysis solution to add value through increased revenues, tighter operating costs and greater efficiency. For the first six months, the team focused on developing analytics that target high-risk control areas. The automated tests quickly highlight exceptions to reveal process issues and potential weakness in controls. The initial analytics also enabled the audit group to analyse the entire data environment from 2002 (when SAP was implemented) until the present day – creating a background record that informs ongoing data analysis.
The automated analytics can be scheduled to run on a daily, weekly or monthly basis, depending on transaction rates, volumes and risk-based priority levels. Backed by the insight of full-population analysis, the company has recovered a large sum of money and strengthened the associated controls to prevent further issues.
The audit group is leveraging the data analysis solution to deliver greater assurance across multiple business areas. Identifying key exceptions in a timely manner has enabled the team to strengthen controls and conduct more focused, more efficient audits. In a growing business with a complex technical environment, the team is demonstrating to both shareholders and management the value of continuous auditing supported by strategic data analysis.
The audit group currently forwards data analysis results to business stakeholders and audit committee members alongside more traditional audit reports. As the team expands its continuous auditing efforts, they intend to give managers direct access to scheduled test results through a browser-based interface. Implementing exception management will allow users to distribute, assign, escalate and track the remediation of each anomaly – ensuring exceptions can be automatically sent to business stakeholders for timely assessment and correction. This will establish a true continuous monitoring environment.
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