Research Streams in Continuous Audit: A review and Analysis of the Existing Literature Carol Brown...
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Transcript of Research Streams in Continuous Audit: A review and Analysis of the Existing Literature Carol Brown...
Research Streams in Continuous Audit: A review and Analysis of the Existing Literature
Carol BrownJeff 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
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
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
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
Nov. 4, 2006 12th Continuous Auditing and Reporting Symposium
Factors Causing the Demand for CA
External
Disclosure
Internal FocusRegulatory
Technology
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)
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)
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)
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)
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)
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)
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)
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.
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?