（2006）The Case for Continuous Auditing.docVIP

The Case for Continuous Auditing By David Coderre, Author of ‘CAATTs and Other BEASTs for Auditors’; ? ‘Internal Audit: Efficiency through Automation’; and ‘The Fraud Toolkit’ The notion of continuous monitoring was first introduced to auditors in the 1980s. Its basic premise was using ongoing automated data analysis to draw conclusions concerning risk in a subject area. The results would help to determine where an audit was required and to focus the audit on the areas of greatest risk. Unfortunately, auditors were not ready; they lacked the tools and necessary data access or were unwilling to embrace this idea at the time. Now, however, there is a proliferation of information systems in the business environment, giving auditors and managers easier access to more relevant information. Further, the rapid pace of business requires prompt identification of, and response to issues. Sarbanes-Oxley Section 409 requires timely disclosure to the public of material changes to financial conditions. ? This regulation, plus changes in auditing standards and the evolution of audit software, has combined to persuade auditors to adopt new approaches to assessing information. Increasingly, the marketplace demands independent assurance that control procedures are effective and that the information produced for decision-making is both relevant and reliable. Often the need for high quality information for decision-making in the highly volatile business environment is greater than the need for reliable historical cost-based financial statements. If a company can’t adjust to changing market, technological and financial conditions, it won’t be in business for long. The environment, technology and audit standards are driving auditors to make more effective use of information and data analysis and encouraging auditors to adopt continuous monitoring. This has produced a shift in the focus of internal audit activities. However, many auditors are still resistant to or confused about