The Future of Continuous Auditing
Continuous auditing is steadily evolving due to technology trends, allowing organizations to get updates on real-time activities. Ongoing professional education and adaptive innovation processes have led to constant auditing as the standard practice in current risk management techniques. Charles (2014) stresses the role of continuous auditing in organizations' readiness to respond to new risks and stay malleable. This article discusses the trends that bring about continuous auditing, the part played by technology, and the advantages and disadvantages of an utterly continuous audit.
The Evolution of Continuous Auditing
Continuous auditing involves monitoring business processes continuously to ascertain the degree of control and risk. It differs from the everyday auditing practice of conducting a review at a specified time based on time intervals; instead, continuous auditing evaluates an organization's aspect in the shortest time and gives feedback when the problem is ongoing (Burton, 2020). This has become more relevant in the current world as organizations aim to promote transparency and good corporate governance practices and manage new risks.
According to Torkura et al. (2021), the advancement of the continuous auditing phenomenon is closely related to technology developments. By adding some advances, such as data analytics technology in the cloud, auditors are now in a position to analyze a large quantity of information at a given point in time. They also enable an extensive audit of activities compared to previous ones, pointing out some risks that may sometimes go unnoticed.
Key Technologies Driving Continuous Auditing
Continuous auditing requires the implementation of several key technologies. Cloud computing is the leading trend, enabling auditors to perform their work anytime and anywhere (Burton, 2020). This has given rise to cloud-based platforms allowing real-time transaction tracking, which helps auditors identify and mitigate risks effectively.
Data analytics is the other major component of continuous auditing. Sophisticated tools in data analysis help the auditor review the big data in the system and quickly make a relationship between the data and potential problems (Eulerich & Schmidt, 2020). Tools like statistical analysis and pattern recognition can help auditors identify risks and errors at the early stages to enhance the efficiency of the audit process.
AI and machine learning are also influencing continuous auditing. Such technologies help predict and avoid problems by analyzing and continually updating data. AI in auditing will help the auditor gain insights into possible risks that may not be easily detected from conventional statistical data analysis.
Benefits of Continuous Auditing
There are several advantages to implementing continuous auditing in organizations. Charles (2014) also states that one of the benefits is the real-time risk management gained from the program. Continuous auditing involves checking and reviewing the organizational activities and controls at a constant interval instead of evaluating them at the end of a fiscal year, which assists in identifying and rectifying potential problems. Proactively managing risks prevents organizations from violating the set regulatory standards and minimizes the chances of losing or damaging the company's reputation.
The other advantage of this approach is that it increases accountability and transparency. This approach effectively transmits relevant information about an organization's performance to its managers, enabling them to identify whether or not there is a need for improving internal control and whether or not the existing controls are appropriately designed and practical (Torkura et al., 2021). The level of transparency is significant for organizations that act in tightly regulated spheres, such as the financial and healthcare sectors.
Another benefit of continuous auditing is the improvement of operational efficiency. Fraud detection and prevention: Auditors can efficiently perform strategic activities when general audit activities are automated (Burton, 2020). It also enhances the effectiveness of an audit and enables auditors to bring more value to the organization by offering recommendations on the findings to the leaders.
Challenges in Implementing Continuous Auditing
Continuous auditing has many advantages but also some disadvantages associated with its implementation. One of the main issues is the requirement of having advanced technological support. According to Eulerich & Schmidt (2020), organizations must adopt cloud solutions, data analytics, and AI solutions to drive the audit continually. Sometimes, these technologies can be expensively acquired and require stringent constant end-user organizations will need to ensure they can address the technology needs.
Another area that could be improved is having the right kind of personnel in the audit team. Another idea is that continuous auditing requires the auditor to be skilled in data analytics, artificial intelligence, and other technologies. This means that auditors need many skills, and organizations must provide them. Burton (2020) also urges organizations to ensure that their auditors are trained adequately to successfully advance to that type of setup.
Furthermore, continuous auditing entails specific organizational changes that require a different way of thinking. Typically, traditional audits result in a check-and-balance perception where the auditors perform the audit at time intervals (Burton, 2020). However, as observed, continuous auditing involves an auditor being more dynamic and continuously assessing risks as and when they occur. This change of attitude could be difficult for some auditors, especially those experienced in traditional audit forms.
Future-Proofing the Audit Function
In this highly digitized world, auditors must examine their practices and prepare for the post-quantum reality. This includes keeping abreast of quantum computing and cryptography developments, training, and teaming up with relevant specialists (Torkura et al., 2021). Auditors should also support the idea of monitoring quantum-related risks and their reassessment on an ongoing basis and at certain times.
In addition, auditors should prompt their organizations to take preventive measures concerning quantum threats (Charles, 2014). This includes learning more about quantum-resistant technologies, completing a detailed post-quantum cryptography migration plan, and ensuring business continuity and disaster recovery are addressable.
Conclusion
Continuous auditing has a positive outlook as technology greatly supports it. Organizations adopting continuous auditing will likely realize better organizational transparency, robust risk management, and increased organizational performance. However, constant audits imply a considerable capital investment in technology and organizational change. Studies have revealed that continuous auditing will become crucial in contemporary governance and risk management frameworks as these trends progress.
References
Burton, J. C., & Fairfield, P. (2020). Auditing evolution in a changing environment. In The Evolution of Audit Thought and Practice (pp. 294-315). Routledge. https://www.taylorfrancis.com/chapters/edit/10.4324/9781003049142-22/auditing-evolution-changing-environment-john-burton-patricia-fairfield
Charles, S. (2014). Charles Financial Strategies LLC. Charles Financial Strategies LLC. https://www.charlesfs.com/fractional-audit-services
Eulerich, M., Georgi, C., & Schmidt, A. (2020). Continuous auditing and risk-based audit planning—An empirical analysis. Journal of Emerging Technologies in Accounting, 17(2), 141-155. https://doi.org/10.2308/JETA-2020-004
Torkura, K. A., Sukmana, M. I., Cheng, F., & Meinel, C. (2021). Continuous auditing and threat detection in multi-cloud infrastructure. Computers & Security, 102, 102124. https://doi.org/10.1016/j.cose.2020.102124