1. Alert Driven Process Integration and Exception Handing: A Case Study on Audit Confirmation with Web Service Mandy Y.S. Tong Dept. of Computer Science, Hong Kong Baptist University mandy_ystong@yahoo.com.hk Dickson K. W. CHIU Senior Member, IEEE Dickson Computer Systems Hong Kong kwchiu@acm.org, dicksonchiu@ieee.org

2. ADAMSCEC/EEE2007-2 Introduction Limited adoption of contemporary IT in audit profession Some audit software packages: but each audit assignment have its own characteristics auditors device an audit planning for each assignment costly cannot handle cross-organizational collaboration / process automation Not many audit firms adopt such audit software

3. ADAMSCEC/EEE2007-3 Case Study: Audit Confirmation Process System Updated the AR/AP report Balance input Seek help Report for balance not yet confirmed Updated information Confirm re-sent of confirmation Report of client seeking help Request for balance confirmation Enquiry for the confirmation balance Auditor Admin. Staff CPA Firm’s Clients Client’s Debtors/ Creditors

4. ADAMSCEC/EEE2007-4 Typical Problems in Auditing Profession Quite difficult to collect adequate confirmations on time for a reliable audit process required by professional auditing guidelines HKICPA - HKSA 500 and HKSA 505 especially if a client’s business partners are from overseas Alternative and less precise methods to verify the account balances check purchase order, invoices, delivery note, shipping documents, and receipt/payment of outstanding balances often manual and much more time-consuming audit fee of an assignment is based on working time

5. ADAMSCEC/EEE2007-5 Solution Approach Overview Monitoring of the overall audit process Alerts management for monitoring and logging Timeliness Management of communications Exception handling Web services Integrate processes and information improve communications Alert-driven Audit Management System (ADAMS)

6. ADAMSCEC/EEE2007-6 System Architecture Clients’ Business Partners Auditors on mobile Clients Bank Client Accounts Information System Status Monitor Alert Management System Balance Confirmation System Collaboration Process Enactor Access Administration System Event Adapter Timer Job and Assignment Monitoring System Requirement Enforcer Web Services Interface ECA Rules, Scheduling Rules, Event Repository, Event Subsciption List Internet

7. ADAMSCEC/EEE2007-7 Example Exception Handling Samples Selection No. of Sample Selected No sample selected At least one sample selected One sample or more than one sample selected Condition Rearrangement by senior manager Normal Process Error made in the balance input process More than one sample Only one sample selected Yes No Send message to senior manager and select samples manually Ask client to re-input the balance

8. ADAMSCEC/EEE2007-8 Other Example Exceptions Extremely low confirmation response rate Daily response report to the auditor for monitoring Send the reminder alert (including automated fax) to business partners Adjust the dates to send reminder

9. ADAMSCEC/EEE2007-9 Web Services Based Integration Interfaces different process enactment systems, enforcement system, and exception handling Offers a unified platform for both manual and programmatic interfaces Automates the data and process integration of the ADAMS with their existing accounting systems

10. ADAMSCEC/EEE2007-10 Key Web Services for Clients ServiceEntering balanceAdjusting balanceAdjusting contact information InputDebtor/creditor NameReference Number Debtor/creditor CodeOriginal Outstanding balance Debtor/creditor Name E-mail addressNew Outstanding balance Debtor/creditor Code Outstanding BalanceNew balance agingOriginal E-mail address Balance agingNew E-mail address OutputReference NumberNew Reference Number Confirmation DeadlineConfirmation Message

11. ADAMSCEC/EEE2007-11 Key Web Services for Client’s Debtors/Creditors ServiceBalance ConfirmationBalance Adjustment InputDebtor/creditor NameReference Number Debtor/creditor CodeDebtor/creditor Name Password Outstanding BalanceOriginal Outstanding balance Balance agingNew Outstanding balance New Balance aging OutputReference NumberNew Reference Number Confirmation DeadlineConfirmation Message

12. ADAMSCEC/EEE2007-12 Conclusion ADAMS effectively manages the workflow auditing process Automating existing workflow to achieve timeliness Application of alert mechanism and Web services Integrates processes and data among different parties Effective decision making and exception handling can be achieved

13. ADAMSCEC/EEE2007-13 Future Work More integration: Link up to the bank systems Detailed performance evaluation of the system Compare the response time and service quality to the existing practice Use questionnaires to evaluate the satisfaction of various stakeholders Security and privacy issues Apply to another professional practices such as solicitors firm

14. ADAMSCEC/EEE2007-14 Question and Answer Thank you!