（2004）Using Control Charts to Monitor Financial Reporting of Public Companies.docVIP

Using Control Charts to Monitor Financial Reporting of Public Companies Richard B. Dull, PhD * Clemson University School of Accountancy Legal Studies 301 Sirrine Hall Clemson, South Carolina 29634 Email: rdull@ Tel: (864) 656-0610 David P. Tegarden, Ph.D. Department of Accounting and Information Systems Pamplin College of Business Virginia Tech Blacksburg, VA 24061 dtegarde@ Tel: (540) 231-6099 September 2003 * Corresponding authorUsing Control Charts to Monitor Financial Reporting of Public Companies Abstract There is currently much being written about increasing the frequency and timeliness of financial reporting. Comments frequently support the desirability and question the feasibility of continuous reporting. Under the current reporting/assurance paradigm, if companies report continuously, auditors must monitor and audit on a continuous basis. Current audit standards generally address the outcomes, rather than the detailed procedures the auditor must follow to meet the objectives of the audit. The purpose of this paper is to propose and demonstrate a technique for monitoring continuous financial information using control charts of accounting information. In this study, financial data were collected and used to implement control charts. Part of the selected companies had known errors, while others had no known errors. The resulting control charts and common interpretation rules identified potential systematic problems only in the companies with known errors. The authors suggest that when continuous data become available, charts similar to these can be used in conjunction with statistical and analytical techniques to detect signals that financial processes are not in control. Refinements of this technique should assist those internal and external to organizations, who are concerned with the reliability of information produced and reported by the organization. Introduction Over the past two decades, the proliferation of technology has led to the incr