（2004）Restoring auditor credibility：tertiary monitoring and logging of continuous assurance systems.pdfVIP

International Journal of Accounting Information Systems 5 (2004) 183– 202 Restoring auditor credibility: tertiary monitoring and logging of continuous assurance systems Michael G. Alles, Alexander Kogan *, Miklos A. Vasarhelyi Rutgers Business School, 180 University Avenue, Newark, NJ 07102-1897, USA Received 31 March 2003; received in revised form 30 November 2003; accepted 1 January 2004 Available online Abstract The continuing series of business scandals, from Enron to WorldCom, have undermined the credibility of auditing and auditors. In response, the SEC and the AICPA have advocated greater reliance on continuous assurance (CA), which utilizes on-line information technology to produce audit results simultaneously with, or a short period of time after, the occurrence of relevant events. In comparison with the traditional financial statements audit, CA aims to be timelier, more comprehensive, more accurate and more supportive of the management process. However, even if CA accomplishes that goal, will that be sufficient by itself to help restore investors’ faith in auditing? We argue that while CA is certainly useful if the problem behind firm failure is lack of information and analysis, it is no more effective than standard auditing in a setting in which managers and auditors collude to deliberately mislead investors. Indeed, its reliance on automated analytics based on auditor- and manager-determined benchmarks makes CA especially vulnerable in the event of fraud. To overcome this potential weakness of future CA systems, we propose that they be augmented with a ‘‘black box (BB) log file’’ that is a read-only, third-party-controlled record of the actions of auditors, especially in rega