APPLYING ROBOTIC PROCESS

AUTOMATION (RPA) IN
AUDITING: A FRAMEWORK
Subject: Control and Audit Information System
Mentor: PhD. Truong Tuan Anh
Presenter: Nguyen Tan Trung
AGENDA
1. INTRODUCTION TO RPA
2. AUDIT
3. FRAMEWORK
4. PILOT PROJECT EVALUATION
5. CONCLUSION

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AGENDA
1. INTRODUCTION TO RPA
2. AUDIT
3. FRAMEWORK
4. PILOT PROJECT EVALUATION
5. CONCLUSION

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1. INTRODUCTION TO RPA
RPA is defined as “a preconfigured software instance that uses business rules and
predefined activity choreography to complete the autonomous execution of a
combination of processes, activities, transactions, and tasks in one or more
unrelated software systems to deliver a result or service with human exception
management”.

An example of the RPA process is the automated retrieval of information from one
system and entering of the same information into another system or activating
another system function.

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 1. INTRODUCTION TO RPA (CONT.)

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https://youtu.be/10_MkXNMpVw
 1. INTRODUCTION TO RPA (CONT.)

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https://intellipaat.com/mediaFiles/2018/08/Architecture-of-RPA-e1557655269160.png
1. INTRODUCTION TO RPA (CONT.)
Benefits:
First, replacing the human workforce reduces the cost and processing time for high-frequency
tasks. The running cost of an RPA software is around one-ninth that of employing a human
being, and RPA “robots” can work 24 h a day and 7 days a week.

Secondly, the accuracy of the business process is improved.

Finally, RPA offers flexibility and scalability. Once a process has been executed by a
software robot, it can be scheduled for a particular time. In addition, the RPA robot is capable
of performing many types of processes and can be quickly reassigned to other processes.

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1. INTRODUCTION TO RPA (CONT.)
Case Study:
As of April 2015, Telefónica O2, the second-largest mobile telecommunications
provider in the United Kingdom, had adopted more than 100 RPA “robots” to
handle 500,000 transactions each month.

London Premium Advice Notes (LPANs) to a central insurance market repository, an

RPA robot was used to automate the most onerous steps: validating data, accessing
the database, creating documents, and uploading the repository. After adoption, the
processing time was only 30 min instead of several days.

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AGENDA
1. INTRODUCTION TO RPA
2. AUDIT
3. FRAMEWORK
4. PILOT PROJECT EVALUATION
5. CONCLUSION

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2. AUDIT
Audit is the examination or inspection of various books of accounts by an auditor
followed by physical checking of inventory to make sure that all departments are
following documented system of recording transactions. It is done to ascertain the
accuracy of financial statements provided by the organisation.

An information technology audit, or information systems audit, is an examination of

the management controls within an Information technology (IT) infrastructure. The
evaluation of obtained evidence determines if the information systems are
safeguarding assets, maintaining data integrity, and operating effectively to achieve
the organization's goals or objectives. These reviews may be performed in conjunction
with a financial statement audit, internal audit, or other form of attestation
engagement.

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AGENDA
1. INTRODUCTION TO RPA
2. AUDIT
3. FRAMEWORK
4. PILOT PROJECT EVALUATION
5. CONCLUSION

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3. FRAMEWORK

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3. FRAMEWORK
3.1 PROCEDURE SELECTION STAGE
When planning the adoption and application of RPA, the accounting firm should first
review the structure of its audit procedures and identify appropriate candidates
based on several factors.

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3. FRAMEWORK
3.1 PROCEDURE SELECTION STAGE
Factor 1: RPA criteria
First, well-defined audit procedures are structured and non-subjective, so that the RPA
software is able to complete tasks based on explicit, rule-based instructions.

Second, the procedures should be high in volume, which maximizes the potential
benefits of automation.

Third, mature audit tasks should be automated first because the outcomes and cost
are more predictable, and mature procedures are less likely to encounter exceptions
and require less human intervention.

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3. FRAMEWORK
3.1 PROCEDURE SELECTION STAGE
Factor 2: data compatibility
Whether the data used in those procedures is compatible with RPA software.

Data should be in a digital format or be able to be efficiently transformed into

digital content.

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3. FRAMEWORK
3.1 PROCEDURE SELECTION STAGE
Factor 3: procedure complexity
Audit firms should be aware that even though RPA is relatively easy to implement, the
implementation process takes time and involves risks, and many implementations
actually fail.

To reduce implementation risk, the accounting firm should evaluate the complexity of
potential audit procedures and demonstrate the usability of RPA with a low-complex
process through a proof-of-concept (PoC) or pilot project. After learning more
knowledge through initial implementations, auditors can apply RPA to more complex
procedures

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3. FRAMEWORK
3.2 PROCEDURE MODIFICATION STAGE
After selecting the appropriate procedure, auditors need to consider whether to
modify the current procedure to prepare the RPA-based audits.

The firm needs to examine the current procedure and modify the audit program, if
necessary, to match the RPA software.

Additionally, the data must be standardized. Auditors are likely to collect data from
multiple sources and labels for the same object may be inconsistent across various
inputs

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3. FRAMEWORK
3.3 IMPLEMENTATION STAGE
For implementation, accounting firms may purchase licenses from RPA providers,
including UiPath, Automation Anywhere, and Blue Prism, and build RPA programs in-
house.
Auditors can easily learn how to build an RPA program using supporting materials
(such as tutorial videos) provided by the software provider.
Auditors' understanding of the underlying details of each client specific audit
procedure is essential for successfully programming RPA to perform the designed
tasks and reduce implementation risk.
With in-house implementation, the accounting firm has a high level of control, and
confidential information is better protected

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3. FRAMEWORK
3.4 EVALUATION AND OPERATION STAGE
In the final stage, the audit teams need to field-test the RPA programs to assess how
well they perform the assigned tasks.
Specifically, an RPA-based audit procedure needs to be performed independently
by the RPA program and by the audit team.

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AGENDA
1. INTRODUCTION TO RPA
2. AUDIT
3. FRAMEWORK
4. PILOT PROJECT EVALUATION
5. CONCLUSION

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4. PILOT PROJECT EVALUATION
Procedure Selection Stage
Financial statement audit engagement of one client in the retail industry.

Confirmation process below is accepted for pilot project:

1) prepare request form,
2) initiate confirmation requests through Confirmation.com4 based on the information
provided by the request form,
3) wait for the confirmations, and
4) download documents and extract the account balance for further audit tests.

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4. PILOT PROJECT EVALUATION (CONT.)
Procedure Modification Stage

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4. PILOT PROJECT EVALUATION (CONT.)
Procedure Modification Stage
Re-design the request templates

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4. PILOT PROJECT EVALUATION (CONT.)
Implementation Stage
As the framework suggests, the program for the implementation of this pilot project
was prepared in-house.

UiPath, a popular RPA software package that provides free licenses for individual
developers, small professional teams, and education entities, was selected.

Within approximately one week, researchers learned how to use the software by
watching online tutorials provided by the software provider.

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4. PILOT PROJECT EVALUATION (CONT.)
Evaluation Stage
This RPA pilot project was evaluated on edu.confirmation.com, which is the training
version of confirmation.com for education and training purposes.

The results show that all the information collected from the RPA program (such as
client name, bank names, account numbers, dates, and account balances) match that
from the manual process, supporting the effectiveness of this RPA pilot project.

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4. PILOT PROJECT EVALUATION (CONT.)
Evaluation Stage (cont.)
An accountant, on average, needs about 30 min to manually complete one
confirmation request. After the RPA adoption, less than 3 min was required to
complete one request.

According to the firm's estimation, more than 600 audit hours can be saved if this
RPA program is performed automatically across different audit engagements.

Once auditors have more knowledge and experience with RPA, they plan to apply it
to other tasks (such as contract downloads, which take about 30 h per client) to save
more audit hours on other procedures.
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4. PILOT PROJECT EVALUATION (CONT.)
 Overall, the evaluation of this pilot RPA project demonstrates the
feasibility of RPA in the audit industry.

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AGENDA
1. INTRODUCTION TO RPA
2. AUDIT
3. FRAMEWORK
4. PILOT PROJECT EVALUATION
5. CONCLUSION

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5. CONCLUSION
The benefits of RPA in auditing
- Auditors have more time to perform higher-level tasks which require professional
judgment, such as evaluating contradictory evidence and designing and applying
follow-up actions.

- Minimize or avoid human errors such as mistakes when confirming amounts, errors
in workpapers, and ignoring red flags.

- A way to improve audit quality by reducing outsourcing and offshoring, which take
up 10–20% of audit hours
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5. CONCLUSION (CONT.)
Errors and exceptions
- During the evaluation of the pilot project, two exceptions were encountered

- Solution is to automate the normal and routine process and leave all errors and
exceptions to human auditors

- However, if the errors or exceptions happen regularly, leaving them for the manual
process may not be efficient. The solution is to first classify errors/exceptions into
two groups, common and uncommon errors. Include follow-up procedures for the
common errors in the RPA automation and auditors need to deal only with
uncommon errors.
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5. CONCLUSION (CONT.)
Next step
- Recently, there has been progress in the evolution of technology for applying
artificial intelligence (AI) in the industry.

- Proposed Intelligent Process Automation (IPA), which refers to combining AI,

cognitive automation, deep learning, and machine learning with RPA.

- IPA leverages the advantages of AI to learn how people make decisions and may
be able to perform complex tasks faster and better.

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REFERENCES
1. Feiqi Huang , Miklos A. Vasarhelyi. “Applying robotic process automation (RPA) in
auditing: A framework”, Elsevier Inc , 2019.

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THANK YOU

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