Summary
The digital economy has significantly altered the way business is conducted and financial information is communicated. A rapidly growing number of organizations are conducting business and publishing business and financial reports online and in real-time. Real-time financial reporting is likely to necessitate continuous auditing to provide continuous assurance about the quality and credibility of the information presented. The audit process has, by necessity, evolved from a conventional manual audit to computer-based auditing and is now confronted with creating continuous electronic audits. Rapidly emerging information technology and demands for more timely communication of information to business stakeholders requires auditors to invent new ways to continuously monitor, gather, and analyze audit evidence. Continuous auditing is defined here as “a comprehensive electronic audit process that enables auditors to provide some degree of assurance on continuous information simultaneously with, or shortly after, the disclosure of the information.” This paper is based on a review of related literature, innovative continuous auditing applications, and the experiences of the authors. An approach for building continuous audit capacity is presented and audit data warehouses and data marts are described. Ever improving technology suggests that the real-time exchange of sensitive financial data will place constant pressure on auditors to update audit techniques. Most of the new techniques that will be required will involve creation of new software and audit models. Future research should focus on how continuous auditing could be constantly improved in various auditing domains including assurance, attestation, and audit services.
The authors acknowledge the research support of the Fogelman College of Business and Economics at The University of Memphis and the helpful comments of the reviewers and Arnold Wright (editor).
Introduction
Electronic commerce, electronic data interchange (EDI), and the Internet are dramatically changing business practices and record keeping. Doing business on the World Wide Web enables organizations to connect into the online world and improve all aspects of their business. In this high-technology environment business transactions are conducted entirely in electronic form. Technological advances have taken the form of low-cost, high-speed digital data transmission by utilizing hardware that produces information quickly and easily, and using software that reduces and, in many cases, eliminates much time, space, and other constraints to information. The progress in information technology, while reducing both transaction costs and asymmetric information problems, has increased economies of scale and scope in all business sectors (Albrecht and Sack 2000). The 1998 Vision Project of the American Institute of Certified Public Accountants (AICPA) states that technological advances are significant forces affecting the accounting profession (AICPA 1998a).
