A Framework For Continuous Auditing

An important decision for any shareholder is deciding whether or not to do business with that company. When a business is audited, the operations are reviewed to make sure that nothing is being hidden. An auditor will review the company’s financial statement and practices to confirm that each are direct and correct. The financial statements are the business’s way of representing them and showing that they are following the Generally Accepted Accounting Principles. The audit process is an important one because it provides a platform for the auditor’s opinion concerning the financial statements of the company. As part of the audit process the auditor will conduct an audit plan that outlines a number of actions that he or she will be perform while also detailing the reason for those actions. With every audit, the business’s management is in charge of handing over the financial statements that the auditor will review; while the auditor will review the statements for any material or immaterial misstatements.

In the last decade, the world of business has been subjected to significant changes. Globalization has given a new meaning to the way in which business is now conducted; i.e. business in a world devoid of geographical boundaries or time zones. Global expansion has also given rise to many emerging firms and laid the foundations for fierce competition amongst existing industries. Internal auditing is no exception. In order not to face complacency or obsolescence, the internal auditing industry has to be proactive and adapt to changing market trends.

Due to increasing economic and financial growth, many types of audit have been incorporated throughout the development process of internal activities. Audits can be performed manually or they can incorporate technology. According to Hunton and

Since internal audits have been performed on an ongoing bases will need to see and verify reports that have been submit with the lesson learned and correction done to achieve compliance with control over financial reports (ICFR) and the SEC regulation.

The audit will become a strong tool for feeding a continual improvement method and providing recognition for excellence in any organization. Eminent implementation of AN audit method needs managers to line positive expectations concerning however audits are going to be conducted, choose vital areas for audits, give positive communication concerning the aim of the audit findings, and involve individuals in following informed the audit findings. The audit ought to be seen as a way for distinctive each opportunities for improvement and areas of excellence that merit reward and recognition.

While many people think of management and accounting positions when mentioning a business, one important role that goes unnoticed is internal audit. Internal audit is an important part of a business. Without internal audit, many businesses would be subjected to theft and fraud. One should note that theft and fraud is not the only reason to have an internal audit. Having an internal audit system can help a company protect against lawsuits from employees and customers. Placing policies and procedures around a company’s assets is crucial to the organization’s success in the future. The policies and procedures put in place by the Institute of Internal Auditors are guidelines the company should not take lightly. Every year the company loses

The business environment has become more complex; therefore, the demands for professional audit have been increased in order to provide reasonable assurance to users of financial statements. An auditor is individual qualified to conduct audits either internally or externally. An internal auditor is an individual whose primary job function is to audit his or her own company, while an external auditor is an individual from outside the company, who usually is employed by an auditing firm who takes the audits several clients. The external auditors plays an important role in the society, one of the important role of an external auditor is to “perform the audit to obtain reasonable assurance about whether the entity maintained

The approach adopted by an audit firm to a specified audit assignment will be a key factor in determining the outcome of the audit. If auditors fail to adopt the correct audit approach then the likelihood of audit failure increases, failure which could lead to a damaged reputation and potentially costly litigation against the firm. This article is the first of a series on risk‑based auditing and audit evidence. AUDIT APPROACHES Essentially there are four different audit approaches: the substantive procedures approach the balance sheet approach the systems-based approach the risk-based approach. The substantive procedures approach This is also referred to as the vouching approach or the direct verification approach. In this approach,

One such challenge facing internal auditors are the exaggerated got to read the business from the top-down. The recent headline frauds that initiated the SOX legislation have concerned major weaknesses within the tone at the highest and also the management setting. several audits of the past centered on transactions inside departments at numerous business units, whereas acts of fraud were being committed by executives at company headquarters. staring at the large image would require a rise within the varieties and extent of reviews at company offices, as well as not solely day to day transactions, however specific monthly, quarterly, and yearly processes which will have severe effects on the monetary statements.

The primary responsibility of the audit committee is to serve as an independent and objective body to monitor a company’s financial reporting process and internal control system (BRC, 1999). In order to properly serve one’s role as an independent audit committee member, one must be free from all personal connections and/or material financial connections to the company or the company’s key executives (Persons, 2009, peer reviewed). A typical expectation of audit committee effectiveness is that independent audit committee members or directors would warrant a lower likelihood of financial restatements. This expectation is supported through prior investigation of empirical evidence (Abbott et al., 2000, peer reviewed; Beasley et al., 2000, peer reviewed). Specifically, Abbott et al (2004, peer reviewed) and Persons (2009, peer reviewed) both find a negative correlation between audit committee independence and the likelihood of financial reporting restatement. These studies support the idea that an independent audit committee contributes positively to the quality of financial reporting and effective monitoring of internal controls.

The first factor is internal control system. As we know, the level of internal control system will significantly influence the inhere risk in auditing. Under the good internal control system, the quality of accounting figures is more accurate and acceptable. Hence, the level of auditing risk become lower and the auditor may reduce relative substantive test under his/her professional judgment. On the contrary, poor internal control will sharply increase the risk of auditing. To avoid auditing failure, auditors have to depend on their professional judgment and take large amount of substantive test. On the other hand, the level of an enterprise’s internal control depends on its management’s business judgment and their

Recent events have highlighted the critical role of boards of directors in promoting good corporate governance. In particular, boards are being charged with ultimate responsibility for the effectiveness of their organisations’ internal control systems. An effective internal audit function plays a key role in assisting the board to discharge its governance responsibilities. Yet how does the board – and its audit committee – satisfy itself that internal audit is functioning effectively and efficiently?

An audit is ‘an independent examination of, and the subsequent expression of opinion on, the financial statements of an organization’ (Hussey, 1999, p. 33). The audit can be viewed as an integral part of corporate financial reporting, where the assurance it provides stems from the trust placed in the judgement of the auditor. The audit is designed to demonstrate ‘the completeness, accuracy and validity of transactions which, when aggregated, make up the financial statements’ (Power, 1997, p. 24).

Internal auditing as an important part of auditing supervision system attracts significant attention in currently business environment, especially after several accounting scandals such as Enron and WorldCom. With the continuous improvement of business environment and regulatory requirements, internal auditing undergoes a progressive process, from the simple to complex, from the basic to advanced.

It is required by law that a company has to have an audit done once a year. A continuous audit is an extra measure that a company can take to make sure that it is following the Generally Accepted Accounting Principles (GAAP). Having a continuous audit going on helps a company fix any mistakes that can arise throughout the year before the mandatory audit that the government requires. They are often used within larger firms or in a firm where “the volume of the transactions is very large.” The audits are often done within a set time interval i.e. every month, three months etc..