Continuous auditing tianli xie_20241457

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Continuous auditing tianli xie_20241457

  1. 1. Continuous Auditing<br />TianliXie<br />July 3rd, 2011<br />Section 1<br />
  2. 2. What is Continuous Auditing (CA)?<br />
  3. 3. ISACA: “the collection of audit evidence, by an auditor, on systems and transactions, on a continuous basis through a period”<br />External Auditors: electronic audit evidence gathering process to render an opinion on fair presentation of financial statements (Rezaee et al)<br />Internal Auditors: process to evaluate business processes and assess management’s monitoring process of the control and disclosure environment (Rezaeeet al)<br />
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  5. 5. Continuous Monitoring (CM)<br />A tool for management <br />Automatic and continuous monitoring of:<br />compliance of business processes and transactions against company rules, policies and objectives <br />effectiveness of internal controls<br />Some techniques/procedures are similar<br />CA and CM complement each other<br />
  6. 6. CA’s advantages over traditional external auditing<br />
  7. 7.
  8. 8. Traditional <br />CA <br />Programming code: <br />@IF( SERV_YEARS >= 5 .AND. DAYS_ABSENT_ACTUAL <= 30, 0.2* MON_SAL_DOLLAR )<br />Purchase Listing<br />Item A $5,000 <br />Item B $5,000 DL<br />
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  16. 16. Demand for CA<br />
  17. 17. Demand for CA<br />SOX<br />Growing complexity of business transactions<br />Trend towards continuous reporting (ie. MD&A, XBRL)<br />Wide adoption of ERP systems and data warehouses<br />More responsibilities for fraud detection<br />
  18. 18. CA Implementation<br />
  19. 19. 1. Business case<br />cost benefit analysis<br />Hard to justify using ROI alone<br />Recommended to develop specific cases where CA is value adding and cost saving<br />
  20. 20. 2. Client Pre-requisite<br />Good control environment<br />Good data integrity<br />Understanding of company system and controls in place<br />Senior executive and BOD support<br />
  21. 21. 3. Adoption Strategy<br />prioritize the risk areas under each business process<br />ROI, degree of risk and costs and benefits<br />start with a less complex, high return and low cost project<br />quick realization of benefits  gain support<br />4. Planning <br />scope and objectives<br />resources and timeline <br />roles and responsibilities<br />
  22. 22. 5. Design and implementation<br />establish the business rules, controls and analytical procedure benchmarks<br />frequency of testing<br />follow up procedures <br />6. Monitoring and communication<br />results and benefits reported to stakeholders<br />
  23. 23. CA software<br />
  24. 24. Barriers to CA<br />
  25. 25. Barriers to CA<br />Cost constraint<br />Hard to demonstrate benefits using ROI<br />Lack of system integration (decentralized)<br />Lack of data integrity and control environment<br />Staff resistance<br />
  26. 26. Current CA adoption and future outlook<br />

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