"Continuous Auditing" Undergoes Study

Internal Auditor, Dec, 1999 by J. Figg

IN A NEW RESEARCH study an emerging audit paradigm is defined as "a methodology that enables independent auditors to provide written assurance on a subject matter using a series of auditors' reports issued simultaneously with, or a short period of time after, the occurrence of events underlying the subject matter." The report, Continuous Auditing, developed jointly by the American Institute of Certified Public Accountants (AICPA) and the Canadian Institute of Chartered Accountants (CICA), explores the differences between continuous audits and traditional audits; the necessary prerequisites for conducting continuous audits; and areas where continuous auditing may challenge current assurance standards.

The report arrives at three main conclusions. First, continuous audits are deemed viable, provided certain interrelated conditions are met. For example, the need for a high degree of automation of the processes used to capture, manipulate, store, and disseminate data related to the subject matter under audit is acknowledged.

In addition, the report surmises that research by academics, experimentation by practitioners, and guidance from standard setters are necessary to help continuous audit services evolve. One issue researchers called "significant": How the knowledge, expertise, and work of internal auditors can be used most effectively in setting up a continuous audit process.

Continuous Auditing also suggests that demand for more reliable, relevant, and timely decision-making information is likely to create a need for continuous audits; but the auditing profession needs to position itself to respond appropriately to the marketplace. To carry out this new form of auditing, the report's authors urge auditors to "change their mind-set to embrace a continuous reporting environment and then acquire the requisite technical skills and knowledge of subject matter to meet the demands of this environment."