（2007）A Theoretical and Technical Model of an external Continuous Auditing System.pdfVIP

A Theoretical and Technical Model of an external Continuous Auditing System 1 2 C. Sophie Lee , ChiChun Chou 1Department of Information Systems, College of Business Administration, California State University, Long Beach, Long Beach, California, USA solee@ 2Department of Accounting Information, National Taipei College of Business, Taipei, Taiwan Abstract: The increasing demand from the capital market for direct-access to companies’ real-time information, and the rapid growth of E-Commerce technology have brought many public-hold companies to voluntarily disclose the selected financial and business information on their websites. However, few companies are able to provide auditing and assurance services on these near-real-time information to ensure the reliability and accuracy of these data. There is a pressing need to explore the technical and economical feasibility of such a real-time continuous-auditing system, and to establish theoretical and technical foundations of such a system. In this paper, we start off by modeling the problem faced by an external auditor and the client. We model a transaction based system by its control configuration to be an n-dimensional space, and define key concepts such as control risk and detection risk. We then identify propositions for control testing and substantive testing when facing different control deficiencies. Once the problem is modeled, we propose an event trigger prototype that would automate the two-phased testing and reporting process. The system audits and synchronizes accounting data among the client, the external auditor, and information users.