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We have designed this in-class exercise to benefit undergraduate or graduate students enrolled in courses in auditing. This in-class exercise involves six short independent analytical procedures scenarios, two each for three different accounts: Payroll Expense; Depreciation Expense; and Interest Expense. The scenarios require students to perform substantive analytical procedures for each of the financial statement accounts. Students must use their accounting knowledge, analytical thinking skills, and problem-solving ability in order to compute an estimated expectation for an account balance. Following computing an estimate of the expected balance, students must then compare the result to the client-recorded balance and determine if the difference is within tolerable limits established for the audit. The primary learning objectives for the in-class analytical procedures exercise involve the following:

1. Understanding when it might be appropriate for the auditor to perform substantive analytical procedures,

2. Understanding how to form an expectation of an account balance when performing analytical procedures, and

3. Understanding how to evaluate the results of a substantive analytical procedure.

Understanding when it might be appropriate for the auditor to perform substantive analytical procedures,

Understanding how to form an expectation of an account balance when performing analytical procedures, and

Understanding how to evaluate the results of a substantive analytical procedure.

In cooperation with KPMG, we believe that the analytical procedures exercise gives students a better understanding of performing substantive analytical procedures. ¹ As identified by Auditing Standard AU-C 520, PCAOB Standard AS 2305, and in the academic literature (e.g., Hirst & Koonce, 1996), analytical procedures are an important part of the audit process. Understanding when and how to perform substantive analytical procedures, combined with how to evaluate the results, will aid in student knowledge of the audit process.

In this paper we report on the approach we have developed and the lessons we have learned in an implementation of the monitoring and control layer for continuous monitoring of business process controls (CMBPC) in the US internal IT audit department of Siemens Corporation. The architecture developed by us implements a completely independent CMBPC system running on top of Siemens’ own enterprise information system which has read-only interaction with the application tier of the enterprise system. Among our key conclusions is that “formalizability” of audit procedures and audit judgment is grossly underestimated. Additionally, while cost savings and expedience force the implementation to closely follow the existing and approved internal audit program, a certain level of reengineering of audit processes is inevitable due to the necessity to separate formalizable and non-formalizable parts of the program. Our study identifies the management of audit alarms and the prevention of the alarm floods as critical tasks in the CMBPC implementation process. We develop an approach to solving these problems utilizing the hierarchical structure of alarms and the role-based approach to assigning alarm destinations. We also discuss the content of the audit trail of CMBPC.

The traditional audit paradigm is outdated in the real time economy. Innovation of the traditional audit process is necessary to support real time assurance. Practitioners and academics are exploring continuous auditing as a potential successor to the traditional audit paradigm. Using technology and automation, continuous auditing methodology enhances the efficiency and effectiveness of the audit process to support real time assurance. This paper defines how continuous auditing methodology introduces innovation to practice in seven dimensions and proposes a four-stage paradigm to advance future research. In addition, we formulate a set of methodological propositions concerning the future of assurance for practitioners and academic researchers.

Purpose: Development of an approach, methods to the internal audit of tax differences, analysis of the peculiarities of the application of internal audit procedures of tax differences and their reflection in the software in Ukraine.

Need for the Study: One of the most important general economic and accounting problems both in practical and scientific terms is the problem of determining the financial results of the enterprise, the methodology of its calculation and methods of taxation.

Questions of consistency of indicators of tax and financial accounting arise constantly as the results revealed according to tax accounting data, considerably deviate from real financial results of activity of the enterprise according to financial accounting data. This leads to tax differences. Moreover, significant deviations can be both in one direction and in the other. These indicators are important for study and analysis.

Methodology: The method of a systematic approach was used to reveal the content of tax differences and build the methodology of internal audit. Selective research, grouping, generalisation are used to study the state of the methodology and organisation of accounting for tax differences and their internal audit.

Findings: The study of the organisation and methods of internal audit allowed the authors to develop their methods of internal audit of tax differences. The chapter highlights such elements of internal audit as sources of information, audit directions, objects of audit and possible typical errors that may be identified during the internal audit. Sources of information for internal audit of tax differences are divided into groups: primary documents, accounting records, reporting and legislation. The authors systematised tax differences and analysed their impact on the pre-tax financial result. Possible errors in accounting for tax differences and ways to correct them are considered. The authors present options for displaying tax differences in software products used in Ukraine.

Practical Implications: This chapter examines the key components of the methodology of auditing the financial statements of the enterprise in terms of indicators of tax differences, the use of which ensures the reliability of reporting, avoids penalties from the tax authorities and ensures the prospects for the organisation. The possibility of digitalisation of accounting for tax differences on the example of software that is popular in Ukraine is considered. The pre-tax financial result is a consolidated, aggregate indicator that is determined by comparing income and expenses from different activities recognised per accounting rules and in most cases cannot be used to calculate income tax without appropriate adjustments.