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Audit Automation as the Foundation of Continuous Auditing

Learn about the benefits and challenges of audit automation, formalizing audit programs, and re-engineering audit processes for continuous auditing. Discover strategies and tools for scalable audit automation and securing continuous auditing systems.

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Audit Automation as the Foundation of Continuous Auditing

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  1. Audit Automation as the Foundation of Continuous Auditing Michael Alles Alexander Kogan Miklos A. Vasarhelyi J. Donald Warren, Jr.

  2. The Case for Audit Automation • Automation of business processes • Labor-intensive repetitive audit work • Cost and availability of qualified audit personnel • Budgetary pressure on internal audit departments • Complexity of business transactions and increasing risk exposure • Scale and scope of audit procedures • Timeliness of audit results

  3. Audit Automation Work Sequence • Identification and engagement of stakeholders: • Business process owners • IT personnel • Internal auditors • Composition of audit automation teams • Automation of audit procedures • Duplicate automation is ideal but too expensive • Verification of automated procedures • Independent verification by experienced auditors • Approval of automated audit program

  4. Formalizing the Audit Program • Automation requires formalization • Formalized is usually automatable • Possibility of formalization is often underestimated • Benefits of formalization: • promotes precision and consistency • improves confidence in audit results • Reduces long-run audit costs • Problems with formalization • Many humans resist formal thinking • Formalization can be very laborious and costly • Certain complex judgments are not amenable to formalization

  5. Re-engineering the Audit Program • Conventional audit programs are not designed for automation • Formalizable and judgmental procedures are often intermixed – redesign is required to separate them out • Re-engineering objective: maximize the proportion of automatable procedures in the audit program (i.e., reduce reliance on informal judgmental techniques) • Substitution of high frequency (“continuous”) automated procedures for eliminated manual methods

  6. Continuous Auditing (CA) as Implementation of Automated Audit • Formalized audit procedures are programmed into an automated audit system that can run continuously • CA = CCM + CDA • Continuous Control Monitoring (CCM): • Access Control and Authorizations • System Configuration and Business Process Settings • Continuous Data Assurance (CDA): • Master Data • Transactions • Analytics (including Continuity Equations)

  7. Baseline Monitoring (Baselining) • Traditionally used in configuration management and IT security • Baseline – a snapshot of system configuration and business process settings • Deltas from baseline  exceptions • Critical issues: • Definition of baseline (the more static parameters are, the better they are suitable for baselining) • Initial verification of baseline values • Security of baseline (both definition and current values) • Accumulation of deltas  redefinition of baseline

  8. Scalability of Audit Automation • Automation of highly specific audit procedures for different enterprise units can incur prohibitive costs • Automation will be scalable across the enterprise only if the repetitive audit procedure automation costs are eliminated • Strategies for making audit automation scalable: • Hierarchical structuring of automated audit procedures – from the most generic audit procedures applicable across the enterprise to the more specific ones for major units and subunits • Hierarchical updates • Parameterization of automated audit procedures

  9. Securing Continuous Auditing • Location of continuous auditing hardware: • client’s premises • audit shop • Physical access security • Logical access security • Super-user privileges • Client’s IT personnel access • Export / import of CA system settings

  10. Software for Audit Automation • ACL • CaseWare IDEA • Approva • Oversight Systems • Governance, Risk, and Compliance Solutions: • SAP GRC Access Control, Risk Management, Process Control (VIRSA) • Oracle Governance, Risk, and Compliance (LogicalApps) • IBM Workplace for Business Controls and Reporting • Paisley Enterprise GRC • OpenPages • AXENTIS Enterprise • BWise • Protiviti Governance Portal

  11. What’s Coming? • AMR Research projects spending on government, risk and compliance applications and services will top $32.1 billion in 2008, up 7.4 % from 2007. In 2009, growth is projected at 7 %. • Hosted, or on-demand solutions • Integration of audit automation with audit working papers software • Transformation of internal audit • Structural changes in external audit

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