New Paradigm in Auditing: Continuous Auditing

Abstract

Organizations are losing substantial amounts of money and facing immeasurable ethical repercussions because of fraud. Regulatory requirements in auditing are increasing with the rate of fraud to boost the investor confidence. The volume and variety of data being created in the organizations are forcing auditors to find more effective and efficient methods as they face the challenges. Once a year audits where sampling is used on audit evidences are not sufficient in the modern business environment. The concept of continuous auditing is the answer to this paradigm. Continuous auditing is considered to be any audit method where the audit is performed on continuous basis. The fundamental idea is that the audit of a transaction is done as it is happening or in a very short time, and a report is issued after the audit. As a result, the anomalies are detected and the audit report is written in real time. The frequent analyses of data enable auditors to perform control and risk assessments in real time or near real time. Continuous control assessment refers to the audits performed on the controls. Continuous risk assessment refers to the identification of systems and processes with risk above the acceptable risk level. In continuous auditing, all the audit activity is done in the electronic environment where only the digital analysis tools and techniques are used. Audit tests are performed on the audit data and the audit report is created by the computer system. The auditor himself develops or uses audit package software to perform audit procedures. As a result, all the records are analyzed easily and quickly on big data in a relatively short time. Initial set up of the continuous audit software requires time and relatively a high level of expertise. However, the same modules may be used repeatedly lowering the cost of continuous auditing in the long run. Moreover, continuous auditing allows remote access to company data which enables auditors to perform the audit activity without going to the site of audit. This lowers the audit cost and increases the time efficiency. Continuous audit applications require substantial set-up efforts. Most of the work is done in the system design and pre-implementation stages. Once the audit model is created, it can be used by iterating the modules. The fundamental stages of continuous auditing are development of the audit model, automation of audit methods, data analysis and reporting. The concept of continuous auditing is very new and implementation methods are in the research stage. This audit method is not yet widely used and presents significant difficulties in implementation. With the continuation of research in this field and the development of information systems, the problems experienced in the implementation of continuous auditing practices will be eliminated and its use will increase.