Process mining in audit

For auditing, process mining can be very valuable. Process mining provides a novel set of tools to discover the real process using process execution data that is logged in the underlying information systems. Thereby, enabling new forms of analysis to detect deviations from the desired process, After all, the execution of processes often differs from their design on paper. For example, instructions may be incomplete, cannot be implemented properly in practice, are interpreted differently by employees - intentionally or not - or are not always enforced by the system design. The crucial question is how big is the gap between process design and the execution of that process in reality. Followed by how to narrow or eliminate that gap in the best way. This analysis leads to logical questions and useful discussions, based on concrete analysis: what are our process risks and vulnerabilities? What is the impact on process efficiency? Do our current processes still add enough value? Are we protecting this value enough? Does it make sense to redefine some or all of the process components? And if so, how? 

Traditionally, an audit requires a substantial effort from both the organization and the auditor to provide reasonable assurance about the correctness of financial statements and compliance regimens of a company. Most audits are far from complete, because audit procedures are often based on random sampling. However, instead of working with a sample, the tools and techniques of process mining enable the auditor to analyze entire business processes, including all process variants. The bottom line is that using process mining technology, auditors can analyze the real process in full rather than assumed processes and samples.

With the right process mining technology, the auditor can visualize those actual processes. At a glance, you can see not only how the processes were executed, but also where and when any bottlenecks and deviations have occurred. It shows which process elements are still within the ‘happy path’ and which are not. That really matters, because the higher the relative proportion of the happy path, the lower the risk of error. This approach enables to see more quickly whether all compliance rules have been properly followed. In short, process mining allows you to turn available process data into an overview of the actual processes, deviations and potential operational risks.

This way, process mining not only improves the understanding of processes, but also their effectiveness and quality. The technology is not solely used for looking into past execution of processes but it   allows for on-time adjustment of processes or enhancing them where necessary.

Further, it  generates additional value by breaking down boundaries between departments, because many processes cross departments and functions. 

The application of process mining capabilities in audit domain is in early phases at this time and the full potential of this technology has not yet been utilized. Our knowledge of and experience with this technology is increasing; we are increasingly skilled in advancing algorithms, aided by increasing data processing and storage capabilities. Thanks to cloud technology, we are also able technically to apply process mining within entire value chains, allowing us to mine processes that run from supplier to end customer.

Within KPMG, we are working hard to further innovate audit and to combine process mining with other tech components, for example, Intelligent automation, artificial intelligence (AI) and Natural Language Processing (NLP). 

While auditing focuses on the past, process mining also gives us a better view of the future. By applying data analysis and process mining, you can better predict where potential errors or risks are in processes; where controls may fall short, or at what points errors or fraud may occur in the future. This enables us to reap the benefits of the close collaboration between our auditors and tech specialists, allowing them to continuously improve their work. 

The beauty of process mining is that we can use this technology for analyzing of all kinds of processes and systems. Provided that a certain minimum data requirements are in place, that these data are accurate. If these conditions are met, process mining can be deployed across a variety of business functions, processes and source systems. This would include finance, logistics, manufacturing, procurement and sales, IT services or HR. 

Process mining leads to  quality improvement of the audit. That helps organizations to be and stay in control. And to respond quickly to risks or changes where necessary. Organizations are excited about such benefits, because the audit can now provide them with crucial information on how and in what areas to optimize their processes and their internal controls. This way, they are assured of a solid foundation for the relevant internal processes.