Business executives know that one of the surest ways to lose management control is to skip the standard practice of auditing business investments. Unfortunately, that is exactly the current state for business intelligence. Spending on business intelligence assets in the global marketplace has reached over $6 billion. Business intelligence has been rated as a No. 1 technology priority for future investment. These crucial BI assets have never been viewed and assessed in the same manner as other corporate investments. Business management has traditionally left management of information technology to the technocrats. That IT black box has become a gaping black hole which devours large volumes of critical business resources.

How do we gain control and effectively manage the business intelligence investment? Although it is a difficult challenge, the most obvious answer is to apply the same stringent rules and practices to business intelligence as any other company asset. How can we allocate critical resources, meet defined strategic and tactical goals, and know that the company is getting the most value from these critical BI assets? We need to audit these investments, analyze and understand the underlying structures and operations, and apply the same profit center standards and rules as for any other business investment.

Have We Lost Control over Business Intelligence Investments?

The simple answer is: Yes, we have lost control of BI investments. Did we ever have control? Not really. Accounting practices have traditionally treated information technology units as cost centers. Operational and other costs are identified then allocated to the business units that receive the services. This causes an automatic schism among the various business arenas and leads to a common theme of political and other conflicts. There is almost invariably no central control point for the business intelligence investment. Who monitors the whole picture, i.e., the real return on the investment; the costs, methods, operations, final benefits? This cost center accounting treatment also ensures that investment costs are isolated from benefits assessments. IT internal procedures usually demand only a business unit sign-off that the delivered system meets the business goals as initially defined. Any determination of the realized benefits rests with the business unit manager and once the "system" is delivered, there is, most often, no time or incentive to spend more resources in clarifying "benefits." Without an objective analysis of the return on investment, there is no effective way to make the critical executive decisions.

What Is a Business Intelligence Investment Audit?

A  business intelligence audit is an unbiased review, analysis and assessment of the condition, value and profitability of the business intelligence assets of a company. The BI audit is based on a rigorous review and analysis of operational practices, methods, tools, systems and products and investment profitability. Just as in a financial audit, BI audits are based on a series of statements regarding the quality and maturity of the BI asset base. The business intelligence audit should consider the BI investment structure and quality. In other words, business intelligence assets are treated as a profit center, with a comprehensive review of the costs, the underlying value structures and the benefits. Time considerations, including changes in value, costs, and benefits over time, are evaluated and assessed.

The BI audit should include a published investment evaluation. This means that comprehensive return on investment statements for applications, business units, and overall business intelligence assets for the company should be created and reviewed. These income statements are created by defining all allocated resources and costs along with a tangible evaluation of benefits. Another critical BI audit component is the business intelligence operations statement, which is a written report on the maturity and quality of the business intelligence operational practices. Assessments are made based on uniform standards for the industry. Ratings are determined based on comparisons with published standards. The business intelligence operations statements include assessment profiles for such components as the basic data quality; information format, availability and delivery; infrastructure systems, tools and software; and the methods and practices for design, development and controls.

Applying Generally Accepted Accounting Principles to a Business Intelligence Audit

Note:  Businesses have traditionally viewed information technology as a cost center and allocated these costs to other business units. However, in conducting the BI audit, we will treat the business intelligence investment and operations/platforms as a profit center.

To be of greatest value, a business intelligence audit must be objective and follow some strict guidelines. The best model is that used for financial accounting, which has rules applied to information that must be assembled and reported objectively. We should be able to rely on the information as free from bias and inconsistency. With some minor changes to the standard financial terminology, these "Generally Accepted Accounting Principles" should be applied to the auditing process for business intelligence. Some of these principles are:

• Principle of regularity: Conformity to enforced rules and laws
• Principle of consistency: Applies the same methods and procedures from period to period
• Principle of sincerity: Reflects the reality of the financial status
• Principle of permanence of methods: Allows the coherence and comparison of the financial information
• Principle of non-compensation: Shows full details of the information without trying to hide those details through balance of a debt with an asset, revenue with an expense, etc.
• Principle of prudence: Shows the reality "as is." Doesn’t show what might be or is projected as a current fact.
• Principle of continuity: Assumes the business will not be interrupted (Mitigates the principle of prudence – assets do not have to be accounted at the disposable value – but at their historical value (i.e., depreciation and going concern)
• Principle of periodicity: Each entry should be allocated to a given period and split accordingly if it covers several periods, i.e., if a client prepays a subscription, lease, etc. The revenue should be split across the associated time span and not counted entirely on the date of the transaction.
• Principle of full disclosure/Materiality: All information pertaining to the financial position of a business must be disclosed.