Real-time monitoring and auditing are rapidly evolving practices that finance departments worldwide are embracing. Why? Because periodic monitoring and audits conducted retrospectively are no longer fit for purpose.
The world is changing - fast. Businesses are undergoing a digital transformation as they try to keep up with a fast-paced, connected world where real-time information - and the ability to act immediately - is crucial.
This VOQUZ Labs guide reveals everything you need to know about real-time monitoring and auditing, plus all the benefits.
Before diving into real-time monitoring and auditing, we must remind ourselves why monitoring (part of internal controls) and auditing come as a pair. The reason is simple: Although they are distinct practices, they both enhance the assurance of an organization's operations, risk management, and compliance processes.
Also, remember that professionals doing these jobs will likely sit in the finance department and use some of the same software to perform their roles.
And talking about software - the advancements over the last few years are astounding. Today, advanced technology, such as AI, data analytics, and machine learning algorithms, means real-time monitoring and auditing is thriving.
Let's now examine how both processes work in the context of real-time execution.
Internal control professionals hold great responsibility. After all, their expertise helps organizations mitigate the risk of unethical and illegal activities - actions that can lead to million-dollar regulatory penalties, criminal prosecution, and severe reputation damage.
And real-time monitoring in the context of internal controls is a technology-driven process that helps internal controls managers to continuously analyze data, helping identify issues and risks in real-time.
The types of data monitored include:
In practical application terms, the above areas represent wide-ranging datasets, from duplicated invoices and unauthorized access attempts to changes in sanctions compliance and vendor onboarding.
Real-time monitoring software solutions, such as VOQUZ Labs' remQ product, which operates within SAP ERP and S/4HANA as an add-on, often provide over 100 controls to cover every possibility.
But here is a question: Doesn't traditional monitoring identify issues and risks too?
Yes. However, there is a glaringly obvious problem. The risk of missing critical issues drastically increases when internal controls professionals only see periodic updates and reports (e.g., quarterly). One of the biggest advantages of real-time monitoring is the ability to take effective action quickly.
The innovative technology that helps internal control professionals is also tremendously beneficial for internal auditors and anyone in the profession. And over the last few years, the demand for real-time auditing software, such as VOQUZ Labs' remQ product, has been increasing quickly. Why? Because it solves fundamental problems in traditional auditing processes.
For example, busy periods (such as year-end financial reporting) often lead to errors or oversights in the audit process. To illustrate this, let's create a scenario. This is a common situation among auditors in corporate officers worldwide:
Long hours into the night, reduced family time, and increased stress levels as financial reporting deadlines approach.
The problem is that many tasks build up over time in traditional auditing practices and are left to the last minute. The following is a simplistic analogy, but it's similar to how a procrastinating school student may wait until the last few days of the summer holiday to start their homework.
Real-time auditing addresses this issue because it focuses on frequent reporting. Much of the work that builds up over months is now spread into weekly - even daily - tasks.
Here are some advantages for auditors using real-time auditing software:
So far, we have discussed how real-time monitoring and auditing solve problems that internal controls and audit professionals face in an increasingly digital world. But how does the technology contribute to a better-managed and more profitable company? The following section will reveal some of the benefits.
remQ is a continuous monitoring software for SAP ERP and S/4HANA, with a large library of built-in controls that help check master data and business processes to avoid financial losses through errors and fraud. remQ can be set up in less than a day, works regardless of organization size and industry, requires no consulting project, and reduces the cost of compliance through automation.
Here is an astonishing statistic: The Association of Certified Fraud Examiners (AICE) found that companies lose an average of 5% of their revenue to fraud each year. You can read the full paper in PDF format here, but that percentage equates to trillions of dollars annually.
And the reality is this: Internal fraud cases keep coming and coming. For example, in late 2022, the US Department of Justice (DOJ) revealed that former Amazon employees de-frauded the e-commerce giant for around $10 million by creating fake vendors (and false invoices).
But how does real-time monitoring and auditing help companies reduce fraud?
Firstly, it's essential to understand that manual processes don't perform well in detecting fraudulent activity. And the statistics backing this statement are concerning:
On the other hand, real-time monitoring and auditing can identify fraudulent activities at an early stage. And crucially, finance teams can take immediate action - significantly increasing the chance of recovering the money.
But the benefits continue. Because just as fraud is detected early and proactively (not by chance), so are the errors committed unintentionally by employees.
The next benefit of real-time monitoring and auditing is the large amounts of money companies can save on internal controls and auditing processes - with solid data backing this up.
For example, a 2021 Gartner report revealed that internal controls automation (real-time monitoring falls under the same umbrella) decreased audit fees by 27%.
And here is another way businesses can boost their bottom line: Companies and organizations that embrace real-time monitoring and auditing can save substantially on labor costs.
How? Traditional manual processes create higher rates of false positives. A false-positive (in the context of internal control and auditing) is when a procedure or test indicates an issue or anomaly - but upon investigation, it was false. The problem is that these investigations cost companies money because employees must spend time on them.
Performing internal control monitoring and auditing in real time reduces false positives because it uses advanced data analytics technology, which means spending less money.
The next upside for businesses that embrace real-time monitoring and auditing is how it supports robust compliance programs (as part of a broader risk management process).
And let's expand on how this is possible. A major part of a finance department's remit is ensuring compliance with regulations, such as the US Sarbanes-Oxley Act (SOX) and similar laws in jurisdictions worldwide.
They have this responsibility because the risk of receiving astronomical financial penalties and severe reputational damage is considerable.
To illustrate this, let's use remQ as an example once again. Real-time monitoring software (like remQ) can help companies significantly decrease the risk of violating regulatory obligations. But how so? Because by monitoring master and business process data in real-time, potential compliance violations are identified and flagged as soon as they happen.
Real-time monitoring and auditing is fast becoming a fundamental addition to financial departments' toolkits worldwide.
The reasons are clear: It helps cut audit errors, reduces fraud, and boosts a company's bottom line. It also contributes to businesses meeting their regulatory compliance obligations.
And to sum up, manual controls and audits are increasingly not up to the task in the always-connected digital age. Real-time monitoring and auditing is the future - and now is the time to embrace it.
VOQUZ Labs' remQ software operates as a SAP add-on with a library of 100 pre-built shipped controls ready to run. To learn more about how remQ can assist your business with its internal controls and auditing goals within your SAP ERP and S/4HANA environment, you can learn more here.
Paul is a RegTech content writer & strategist with extensive experience in digital marketing and journalism. His work has appeared in the Guardian newspaper. He also holds a degree in International Relations, where he studied global sanctions compliance and cross-border finance.
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