Although it is becoming increasingly important that companies have better insight into their business processes at any given moment, allowing them to adapt to changes in the environment, legislation and their organisation, only a limited number of companies are capable of adequately addressing and providing insight into key risks. This is shown by KPMG’s recent international research performed amongst seven hundred organisations in the EMA region. Although a majority of the companies acknowledge the necessity of being able to quickly identify when control measures fail, only 9% of companies have introduced any form of Continuous Auditing and Continuous Monitoring (CA/CM).
“Because stakeholders demand that organisations provide assurance regarding the financial processes as a result of the financial crisis, it is becoming increasingly important that companies are able to provide insight on a continuous basis”, says KPMG’s Peter Paul Brouwers. “Furthermore, increasing legislation, emerging risks and the measures that organisations have to take to optimise costs all influence the manner in which risk and performance management is perceived. Companies that are not capable of adapting quickly to changes that influence their business processes will not only face threats from competitors; the continuity of their business will also be threatened. Companies that take continuous monitoring seriously will make the most out of possibilities offered by new IT developments. CA/CM will help them get assurance regarding the quality of their business processes, will avoid surprises and will ensure that these processes are run as reliably and efficiently as possib
KPMG research shows that the majority of companies currently use conventional methods, such as random tests and letters of representation in order to provide management’s assurance regarding the effectiveness of the control measures taken. Only a limited number of companies are monitoring controls and transactions on automated and continuous basis. According to the companies who were involved in this research the following business processes will benefit the most from a transfer to CA/CM: reporting on financial management, treasury and cash management and operational processes, such as the entire procurement process, sales, payments and payment receipts. According to Mr. Brouwers: “The added value of the system is maximised primarily in the processes that occur often, are highly automated and that are exposed to financial and business risks.”
Although, according to Mr. Brouwers, the majority of organisations researched recognise the advantages of CA/CM, there is still some reluctance to migrate to a complete implementation. Mr. Brouwers: “Because of the increasing need to gain insight into an organisation’s risk environment, the number of companies that will eventually adopt CA/CM will increase rapidly and it is expected that more companies will invest in CA/CM in the short-term. This will however require a certain amount of time and effort, in particular because of the organisational changes required to become a more information-driven organisation.”