Report 13: 2017

Audit of Journal Entries and Property, Plant and Equipment Using Data Analytic Procedures

Background

At 30 June 2016, property, plant and equipment reported in the Annual Report on State Finances, totalled over $97 billion, excluding land. Agency staff and systems process tens of millions of financial transactions relating to property, plant and equipment. They also process millions of accounting general journal entries that change revenue, asset, expenditure and other financial balances.

Agencies are required to maintain suitable policies and financial controls to ensure that these transactions are justified, approved and correctly processed. While policies, controls and well-trained staff reduce the probability of errors or fraud, they do not guarantee that transactions will not involve errors or fraud.

Our normal testing of transactions during our annual financial audits aims to identify ‘material’ errors. That is, an error that would cause a line item in the financial statements to be materially misstated. Our sampling of transactions supports the material accuracy of the financial statements and gives an understanding about the reliability of controls, but is not primarily focused on identifying fraud.

Data tools enable us to analyse more transactions than would be required during our annual financial audits. They also assist with the identification of fraud or errors. Our last data analytics report covered payroll and other expenditure (Report 6 – 2016).

Data analytics uses computer capability to search large volumes of transactions and data for unusual items, patterns and events that could indicate fraud. We then further investigate the items or events to identify errors or potential fraud.

 
Page last updated: July 19, 2017

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