Research Streams in Continuous Audit: A review and Analysis of the Existing Literature Carol Brown...

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Research Streams in Continuous Audit: A review and Analysis of the Existing Literature Carol Brown Jeff Wong Amelia Baldwin

Transcript of Research Streams in Continuous Audit: A review and Analysis of the Existing Literature Carol Brown...

Page 1: Research Streams in Continuous Audit: A review and Analysis of the Existing Literature Carol Brown Jeff Wong Amelia Baldwin.

Research Streams in Continuous Audit: A review and Analysis of the Existing Literature

Carol BrownJeff Wong

Amelia Baldwin

Page 2: Research Streams in Continuous Audit: A review and Analysis of the Existing Literature Carol Brown Jeff Wong Amelia Baldwin.

Nov. 4, 2006 12th Continuous Auditing and Reporting Symposium

The Purpose of This Paper

A review and analysis for literature related to continuous auditing (CA) to provide a background for:

Researchers working with CA related topics Professionals whose clients (or

organizations) wish to implement CA systems or have done so.

Companies providing software or other technologies to enable CA systems

Page 3: Research Streams in Continuous Audit: A review and Analysis of the Existing Literature Carol Brown Jeff Wong Amelia Baldwin.

Nov. 4, 2006 12th Continuous Auditing and Reporting Symposium

Scope of Literature Reviewed

More on our definition Scope of the literature reviewed

Continuous auditing Continuous assurance Continuous monitoring Real-time auditing Other synonymous terms

Page 4: Research Streams in Continuous Audit: A review and Analysis of the Existing Literature Carol Brown Jeff Wong Amelia Baldwin.

Nov. 4, 2006 12th Continuous Auditing and Reporting Symposium

Literature Search Procedures

Search for papers Broad searches on library databases and the

internet Papers presented at CA conferences Collegial input References cited in all papers read

Selection – papers that appeared to be relevant, meaningful and important to CA

Over 75 papers and growing

Page 5: Research Streams in Continuous Audit: A review and Analysis of the Existing Literature Carol Brown Jeff Wong Amelia Baldwin.

Nov. 4, 2006 12th Continuous Auditing and Reporting Symposium

Classification of Literary Contributions

Factors causing the demand for CA

CA theory and guidance

Enabling technologies

CA applications

Economic impact – costs and benefits

Page 6: Research Streams in Continuous Audit: A review and Analysis of the Existing Literature Carol Brown Jeff Wong Amelia Baldwin.

Nov. 4, 2006 12th Continuous Auditing and Reporting Symposium

Factors Causing the Demand for CA

External

Disclosure

Internal FocusRegulatory

Technology

Page 7: Research Streams in Continuous Audit: A review and Analysis of the Existing Literature Carol Brown Jeff Wong Amelia Baldwin.

Nov. 4, 2006 12th Continuous Auditing and Reporting Symposium

Demand – External Disclosure

Calls for increasing the frequency or disclosing financial information is a driving force behind the demand for CA. Relevance and reliability are fundamental to

valuable information.

Rezaee, et al (2002) Elliott (2002) Hunton, et al (2002) Vasarhelyi, et al (2002)

Page 8: Research Streams in Continuous Audit: A review and Analysis of the Existing Literature Carol Brown Jeff Wong Amelia Baldwin.

Nov. 4, 2006 12th Continuous Auditing and Reporting Symposium

Demand – Internal Focus

Complex webs of information processing and exchange have increased the importance of assuring the integrity of data used to make decisions. Firm-wide information linkages and

information sharing partnerships

Van Decker (2004) Vasarhelyi, et al (2004) Greenstein and Ray (2002)

Page 9: Research Streams in Continuous Audit: A review and Analysis of the Existing Literature Carol Brown Jeff Wong Amelia Baldwin.

Nov. 4, 2006 12th Continuous Auditing and Reporting Symposium

Demand – Laws and Regulations

Sarbanes-Oxley Act of 2002 CA can help with management’s

responsibility for the internal control structure

CA helpful to external auditors who must assess the internal controls and opine on them.

Means and Warren (2005) White (2005) White (2005)

Page 10: Research Streams in Continuous Audit: A review and Analysis of the Existing Literature Carol Brown Jeff Wong Amelia Baldwin.

Nov. 4, 2006 12th Continuous Auditing and Reporting Symposium

Demand – Technology

Rapid growth in e-business transactions has contributed to the need for continuous online assurance processes.

Kogan, et al (1999) AICPA – Elliott Committee Report (1997) Vasarhelyi, et. al (2004)

Page 11: Research Streams in Continuous Audit: A review and Analysis of the Existing Literature Carol Brown Jeff Wong Amelia Baldwin.

Nov. 4, 2006 12th Continuous Auditing and Reporting Symposium

Economic Impact

CA processes may result in cost efficiencies by: Automating and replacing some visual

assurance processes (Means and Warren, 2005)

Allowing external auditors to test transactions more efficiently, in larger number, and with fewer mistakes (Rezaee, et al, 2002; Searcy and Woodruff, 2003)

Page 12: Research Streams in Continuous Audit: A review and Analysis of the Existing Literature Carol Brown Jeff Wong Amelia Baldwin.

Nov. 4, 2006 12th Continuous Auditing and Reporting Symposium

Continuous Auditing Applications

Nearly half of the Institute of Internal Auditors members responding to a survey indicate some type of CA software application was being used in their work.

Up 24 percent from a similar survey in 1998 - Glover, et al (2000)

Page 13: Research Streams in Continuous Audit: A review and Analysis of the Existing Literature Carol Brown Jeff Wong Amelia Baldwin.

Nov. 4, 2006 12th Continuous Auditing and Reporting Symposium

Continuous Auditing Applications

Some CA applications: Auditing large paperless real-time systems

at AT&T Bell Laboratories, Vasarhelyi and Halper (1991)

Variance analysis in the construction industry, Rose and Hirte (1996).

Healthcare facility operational auditing, Nelson (2004)

Royal Canadian Mounted Police accounts payable, Coderre (2006)

Page 14: Research Streams in Continuous Audit: A review and Analysis of the Existing Literature Carol Brown Jeff Wong Amelia Baldwin.

Nov. 4, 2006 12th Continuous Auditing and Reporting Symposium

Conclusions

CA is a multi-disciplinary topic Research streams from information

systems, accounting, external and internal auditing are contributing to the growing body of CA literature.

The demand for CA and technological capabilities to implement it suggest that CA will increasingly become an important assurance tool.

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Nov. 4, 2006 12th Continuous Auditing and Reporting Symposium

Future Research Needs

More detailed descriptions of actual working systems are needed.

Architecture and techniques Best practices Practice will provide feedback on theory to enhance

theoretical framework.

Accurately capturing the economic costs and benefits of CA systems implemented.

Initial and long-run costs and benefits

How do CA systems change individual and organizational behavior?

Do they enhance the control environment along with providing specific control activities?