Question

Continuous auditing can be described as automating the audit plan via scheduled automated procedures. These procedures can synchronize with the timing and frequency of data evaluation. The auditor can be automatically updated with exception reporting. Formulate an opinion as to whether this is the scope of continuous auditing or is there a much larger spectrum? Do you feel continuous auditing will replace traditional audits we conduct today? Why or Why not?

Answer 1

Solution

The detailed audit is continuous audit. Auditor conducts a detailed examination of books of accounts very frequently checking and validating each and every transaction. The continuous audit can be divided into two parts (i.e) continuous audit = continuous control monitoring + continuous data assurance. In today's business environment the continuous audit is vital to be implemented as the traditional audit system does not check each and every transaction due to restrictions in time lines.

Automated audit procedures is a condition for the continuous audit. The audit automation facilitates "assurance on demand". The audit programs and procedures are designed by the human auditors based on their knowledge, skill and experience. But, this does not mean that such procedures are accepted by everyone. There arises a significant room for interpretation.

The audit automation provides an exceptional reporting. The reliability of such reporting is questionable because of different interpretation. Apart, the quality of the exceptional reporting is relied on the efficiency of the audit principles and procedures fed to the automated system. Any flaw in the system, will have adverse impact on the exceptional reporting.

It is better to have traditional audit and continuous audit together in a business entity. Both the audit needs to be done by two different audit groups. The continuous audit will be in the form of internal audit and the traditional audit will in the form of external audit. The entities are benefited by the audit opinions provided by two different auditors which minimizes the interpretations. The traditional audit needs to be accommodated by a system audit which ensures the internal controls of the system in context with the accounting principle and the procedures.