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11 – 20 of over 19000David Y. Chan and Miklos A. Vasarhelyi
The traditional audit paradigm is outdated in the real time economy.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…
Abstract
The traditional audit paradigm is outdated in the real time economy.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.
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Chi‐Chun Chou and C. Janie Chang
The increasing provision of timely financial information through web‐based technology is expected to improve the quality of communication between a company and its stakeholders…
Abstract
Purpose
The increasing provision of timely financial information through web‐based technology is expected to improve the quality of communication between a company and its stakeholders. However, the information asymmetry problem still exists since almost all “web‐releases” usually remain unaudited. The purpose of this paper is to propose conceptual and technical frameworks of continuous auditing to provide a solution for this problem. This solution could also move the traditional auditing forward to the new e‐auditing generation.
Design/methodology/approach
This paper develops a conceptual framework to present why continuous auditing would dominate other auditing approaches in examining web‐based financial information. Using a 3 × 2 × 2 × 1 design, this study compares the economic efficiency of three auditing approaches under the joint‐combination of various disclosure types, materiality perceptions and information environments. A technical framework, the external continuous auditing machine, is derived from the conceptual framework to specify the generic procedures to perform the online control testing and the continuous substantive testing over web‐releases.
Findings
Continuous auditing issues are scrutinized both theoretically and technically. Two main conclusions arise. First, the behavior model simulates various information disclosing and auditing environment and argues that the continuous auditing would be the most appropriate approach for web‐releasing assurance. Although the hypothesis derived from that model still needs further empirical supports, the anticipated sustaining is quite reasonable under the emergent web‐release practice.
Originality/value
Given the new era of online, real‐time business reporting, constructing a theoretical model and applying it to develop a technical model for implementing continuous audits for web‐releases provide significant contributions to the accounting/auditing professionals as well as researchers.
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Michael Alles, Gerard Brennan, Alexander Kogan and Miklos A. Vasarhelyi
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…
Abstract
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.
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Ting Sun, Michael Alles and Miklos A. Vasarhelyi
The purpose of this paper is to analyze the hurdles, compared with that in the United States, for the implementation of Continuous Auditing in China. As a timely, cost-saving and…
Abstract
Purpose
The purpose of this paper is to analyze the hurdles, compared with that in the United States, for the implementation of Continuous Auditing in China. As a timely, cost-saving and efficient auditing method, continuous auditing is being increasingly adopted throughout the world. However, while it is increasingly applied in the USA, continuous auditing is still in its infancy in China.
Design/methodology/approach
This paper compares and contrasts China and the USA in three important dimensions that determine the “economic architecture” of assurance: the business environment, the audit profession and technology.
Findings
The authors find that excessive government intervention in business, the lack of competition, independence of auditors, the support from management and the continuous auditing-specific regulations, as well as the technology gap between these two countries, are the main barriers for the implementation of continuous auditing in China.
Research limitations/implications
The findings of this paper provide better understanding of the drivers of continuous auditing adoption in the USA and the barriers toward doing so in China.
Practical implications
The term “continuous auditing” has never been formally introduced until the release of the draft of the Internal Control Audit Guide in 2011.
Originality/value
The paper highlights how technology by itself is not deterministic, but given the extraordinary rise in the Chinese economy in both its size and its sophistication, it has be to assumed that its “leapfrog” into parity if not outright leadership in continuous assurance is still a matter of “when” and not of “if”.
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Salvatore Polizzi and Enzo Scannella
This paper aims to analyse the implementation challenges faced by internal audit departments of public sector organisations and central banks when implementing continuous auditing…
Abstract
Purpose
This paper aims to analyse the implementation challenges faced by internal audit departments of public sector organisations and central banks when implementing continuous auditing (CA) systems. CA aims to monitor internal control systems and risk levels on a continuous basis to support the audit process. This study identifies the implementation challenges of CA systems and proposes adequate countermeasures.
Design/methodology/approach
This study employs the design science information system research and the design science research process methodologies to ensure the rigor of this analysis. These research methodologies are adopted to tackle identified organisational problems and propose solutions. This methodological approach consists in the following phases: identification of the problems and motivation; definition of the objectives of the solution; research design and development; evaluation; communication.
Findings
This study detects several implementation challenges for public sector organisations and central banks and proposes adequate solutions. This study finds that these challenges are related to organisations’ complexity, institutional rigidity, potential threats to internal auditors’ independence and the issue of considering CA system as a “real time error correction” mechanism. The solutions involve the development of a business process focussed audit approach to enable internal auditors to analyse CA indicators, and the use of CA systems to support each phase of the audit process.
Originality/value
This study contributes to the scant strand of literature on internal auditing in central banks. Given the exceptional demand for guidance concerning internal auditing in the public sector and in central banks, this paper provides guidelines for these organisations to implement CA systems and to tackle implementation challenges. The analysis allows internal audit departments within central banks to better support their organisations in the achievement of their important regulatory and policy objectives.
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Munir Majdalawieh, Sofiane Sahraoui and Reza Barkhi
The pressure is on organizations to go beyond automating their internal audit activities and develop and integrate internal auditing into business processes of the enterprise…
Abstract
Purpose
The pressure is on organizations to go beyond automating their internal audit activities and develop and integrate internal auditing into business processes of the enterprise. This paper aims to propose a “full power” continuous auditing (CA) model with three key components: electronic audit evidence functions; intra‐process auditing; and inter‐process auditing.
Design/methodology/approach
This paper follows a design science approach by identifying relevant problems from the current literature, defining the objectives of the study, designing and developing the “full power” CA model, and evaluating the model. The model supports business process‐centric auditing and enhances the business monitoring capacities of organizations enabling the fulfillment of increasingly stringent compliance requirements with internal policies as well as external regulations.
Findings
This work has attempted to fill the gap between the enterprise solutions offered by enterprise system providers and a structured approach to auditing within enterprise environments by proposing the IIPCA model which combines the automated controls inherent in the systems with continuous audits based on electronic audit evidence. The approach provides for auditing both within and between processes ensuring comprehensiveness of the audit process.
Originality/value
The paper makes a contribution by proposing a “full power” continuous auditing model on the principle of continuous monitoring and with predefined building block components; facilitating the integration of continuous auditing within business information processing in an enterprise using different building blocks; and giving practitioners insight on the adoption of the CA in the enterprise and how it will enhance their audit effectiveness, and audit efficiency.
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El‐Hussein E. El‐Masry and Jacqueline L. Reck
The purpose of this paper is to examine investors' perceptions of the usefulness of continuous online auditing (COA) prior to and after the Sarbanes‐Oxley (SOX) Act and assesses…
Abstract
Purpose
The purpose of this paper is to examine investors' perceptions of the usefulness of continuous online auditing (COA) prior to and after the Sarbanes‐Oxley (SOX) Act and assesses the current value relevance of continuous auditing. The paper examines two research questions: first, whether continuous online audits significantly impact investors' perceptions of firm risk and, consequently, the value of a firm and second, whether continuous online audits have a greater impact on investor assessment of a firm's risk subsequent to SOX.
Design/methodology/approach
A 2 × 2×2 × 2 between participants laboratory experiment was conducted. Technology risk was manipulated at (e‐commerce risks versus no e‐commerce risks), traditional financial risk was manipulated at (high financial leverage versus low financial leverage), COA was manipulated at (traditional annual audit versus continuous online audits), and pre‐ and post‐SOX was tested (2002 sample versus 2005 sample). The primary dependent variables used were investors' assessment of firm risk and investors' assessment of earnings per share estimates. Additionally, investors' confidence in their investing decision was captured.
Findings
Results indicate a demand for COA as reflected in investors' reduced firm risk estimates, and increased confidence in estimates. Comparative results from the 2005 sample and the 2002 sample indicate that the value relevance of COA has increased after the introduction of SOX in July 2002. We attribute this shift to investors' perception that COA is a factor that helps mitigate firm risk and relatedly boosts investor confidence in their investing decisions.
Research limitations/implications
Only a single proxy for traditional business risk (financial leverage) is examined. Future studies need to examine the ability of continuous online audits to mitigate other types of traditional business risks.
Originality/value
The study establishes the current economic feasibility of continuous online audits. Additionally, the most insightful finding of the study is that the value relevance of COA has increased after the introduction of SOX. This shift is due to investors' perceptions of COA as a factor that mitigates firm risk and helps boost confidence in their investing decisions. Implications for the profession, the classroom and public policy are discussed.
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Petros Lois, George Drogalas, Alkiviadis Karagiorgos and Kostantinos Tsikalakis
The aim of this study is to examine continuous auditing in the digital age from the perspective of audit firm employees. It also investigates contemporary factors affecting…
Abstract
Purpose
The aim of this study is to examine continuous auditing in the digital age from the perspective of audit firm employees. It also investigates contemporary factors affecting continuous auditing, as well as the techniques that could be utilised for its implementation.
Design/methodology/approach
Internal audit departments of private companies were contacted via email and given a questionnaire developed based on the extant literature. The sample consisted of 105 individuals employed in the largest audit institutions in Greece. Data were analysed using multiple regression.
Findings
As expected, technological advances are indispensable for the establishment of an effective digital auditing system. The impact of data protection measures against cyber-attacks as well as employees' skills and training were found to be significant. Particular attention should be given to the preparation and building of virtual auditing teams.
Research limitations/implications
The fact that the digital era is still nascent with its final outcomes not yet visible makes it difficult to produce accurate predictions and draw conclusions. Further, there is a need to survey salient stakeholders in other country contexts beyond Greece pursuant of producing generalisable results.
Practical implications
The actions taken by companies to ensure cyber security and the formation of virtual teams were found to be highly significant for the implementation of a real-time auditing process. Traditionally, factors such as cost and time play an important role in optimising internal continuous auditing. Technological advancements combined with careful, strategic and case-specific implementation have the potential to enhance the efficacy of older methods.
Social implications
The positive propensity of staff to adopt technology and modern techniques illustrates how implementation difficulties can be overcome through the redefinition and scheduling of an organisation's objectives and training of its personnel.
Originality/value
Audit firm employees highlighted the protection of personal data, the avoidance of cyber-attacks and training as major continuous internal auditing goals. The results indicate acceptance towards technology and modern techniques, provided companies ensure adequate preparation and staff training conditions.
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