Process Mining is a field that has been shaped likewise by researchers and industry leaders with its academic roots going all the way back to the 1990s. The use of Process Mining in audit has since then developed into one of the biggest use cases for process mining nowadays. Being used by all Big 4 for external Audit (Deloitte, KMPG, EY, PwC) Celonis Process Mining can help to understand the story that lies behind KPIs and spot patterns that are particularly prominent for fraud or compliance issues. Celonis has turned into a must-have tool for external auditors helping to understand clients better. At the same time, the application of Process Mining in Audit also has been pioneered and introduced within research. I took the time to speak to one of the most influential researchers within the Process Mining community, Mieke Jans. Mieke Jans was a pioneer for exploring the application of process mining in audit and therefore bringing process mining into a new real-life setting. In combination with her academic background Mieke has previously worked as a Senior Manager at Deloitte and now holds two professorship positions at the Business Informatics Department of Hasselt University and the Accounting and Information Management Department at the University of Maastricht. Mieke is also an active partner of the Celonis Academic Alliance and steering committee member of the IEEE Task Force on Process Mining.
Your special area of expertise is Process Mining for Audit. When did you realize that the two fields could be a perfect match?
MJ: Understanding the synergies between Process Mining and Auditing was definitely not a one-moment realization. When I applied process mining for the first time, it was in the context of reducing internal fraud risk. At that moment, no commercial tooling existed, nor did I already have a bigger vision on Audit in general. Throughout the years that followed, where both process mining research and tools advanced, as well as my own knowledge on Audit, it became more and more clear that this combination is a promising combination. You refer to the application of Process Mining techniques within the auditing sector as “a promising combination.” In how far is this promising and what are common auditing pain points that Process Mining can help with. Why is process-related thinking critical for audit?
MJ: The financial audit profession has accepted sampling as an audit procedure, because it was/is not feasible to investigate every transaction. This can however never give you full assurance that you are aware of everything that has happened. However, a full-population testing would theoretically most support the assurance that the auditor is expected to provide.
The process-related view is important in the light of international audit standards. The standards state that the auditor is expected to understand the environment of the entity. Also, they need to gather evidence that there is sufficient control over financial reporting. How else to have control over your financial reporting than by controlling your business processes and their impact on the financial ledger?
So where is Process Mining currently standing in helping to get a more holistic picture of your entity?
MJ: With process mining, the auditor can move away from sampling towards full-population testing. A key word here is ‘towards’. We are not at the stage yet to test ánd to examine the full population of audit evidence. Currently, too many false positives are still generated. Process Mining is currently most commonly used to gain insights in the order-to-cash and the procure-to-cash cycles, since there is most public documentation on these processes. Also, the financial impact of these cycles is significant, rendering the investigation worth the investment.
You mentioned that Auditing will get a lot more assurance through being able to get access to full-population testing or so to speak a holistic data set by using Process Mining. What challenges and risks do you think Auditing will face with this in the near future? What is the role of Process Mining in this? MJ: I experience that Audit firms are keen on using new techniques that improve their level of assurance. However, I also feel they need to have some warranty of not being criticized by the controlling institutes when they for example uncover a lot of discrepancies, but were not able to investigate all of them. This risk sometimes keeps firms from doing a more profound analysis to start with, even when they realize it would yield a more valuable opinion.
Process mining researchers have to take away this hurdle by providing tools and techniques that can combine better the power of computers with the expertise of the auditor. My idea is that the auditor will become more and more a business and financial expert. The auditor can use the mentioned techniques to fully understand what takes place in the organization on one hand and how this is reflected in the financial books on the other hand. More than ever, the auditor can grasp the bigger picture and check whether accounting principles are adhered to.
We have mainly talked about the use of Process Mining for external audit so far, but Process Mining helps both internal and external audit. How does the use of Process Mining differ for internal and external audit? MJ: The internal auditor can combine both compliance and efficiency issues while doing the analysis, while the external auditor is only charged with the former. This makes it, from a cost perspective, more attractive for an organization to integrate process mining in its internal audit department than outsourcing this entirely to the external auditor (who is by law limited in the consulting service it can provide to its clients). The output of these analyses (or intermediary steps like the constituted event logs) can still be provided to the external auditor, who could investigate it with a more trained eye from an independent standpoint having the advantage of benchmarks.
Thank you very much for the great introduction into your field! You have also seen the Process Mining field grow over the last years and have grown together with it. What is your most important take-away observing this growth and development of the field?
Always walk in the clients’ shoes. It was the most important lesson I learned at Deloitte, and it keeps on coming back in many aspects of growth I’ve experienced so far, including the one of the process mining sector.
What are you currently working on?
I would like to build an active learning mechanism that starts with the output of a conformance checking algorithm and the expertise of an auditor to reach a real full-population testing.
If you can sum up your findings why should the Accountants and Financial Experts of the future learn about Process Mining today?
Because accounting and finance are supporting services of an organization which can often be traced down to business processes. The better these processes are understood, the more value Accounting and Finance can deliver to the organization.
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