AUDIT ANALYTICS AUDIT

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ESSAY 1: CONTINUOUS AUDITING—A NEW VIEW Table 1-8: Procedures and Their Evolution—continued Confirmation Substantive testing Analytical review Internal control evaluation and compliance testing Traditional procedures Manual confirmations or confirmation.com Manual examination of documents Comparison of end of the month ratios and their trends Manual tracing, observation, structural evaluation Modern procedure Close to full population confirmation with database to database confirmatory pings/handshakes Electronic documents, process mining A wide selection of analytics procedures at most stages of the audit Reliance on ERP design, CCM 4.6 Choice of Assertion International auditing standards and U.S. GAAS classify assertions into three categories: Assertions about classes of transactions and events for the period under audit Assertions about account balances at period end Assertions about presentation and disclosure To which we add the following: Assertions about emerging issues of less traditional nature An assertion basically represents the concern of auditors of particular system faults. Exploratory Data Analysis (EDA) (Liu, 2014) allows for preliminary data examination leading to choice of assertions to be considered in a particular audit. By looking at the data characteristics and distributions and contingencies, the auditor will start with basic assertions and choose additional ones to be considered. EDA will allow for the creation of assertions and the transformation of EDA into confirmatory data analysis. 4.7 Analytic Method The development of new IT infrastructure, analytic methods, and the expansion of ALOs is changing the potential of continuous audit to a new dimension described in table 1-5: Expanding Conceptualization in CA and CM. The essence of audit automation and the progressive evolution of an audit ecosystem entails synergistic integration of its elements. As has repeatedly been discussed in this essay, systems that support 33
AUDIT ANALYTICS AND CONTINUOUS AUDIT:LOOKING TOWARD THE FUTURE business processes have become too complex to be efficiently addressed through pure human assurance. Layers of data, software, and the interconnection with upstream and downstream systems (and processes) make observation and evaluation very complex. In general an entirely new family of audit analytics is emerging 15 that can affect all parts of the audit engagement and can allow the use of an expanded data framework that includes external big data to support audit assertions in an unorthodox manner. Table 1-9 illustrates the number of potential changes and improvements to assurance methodologies. It should be considered together with table 1-10 in which the emphasis is more on procedures. Table 1-9: Audit Phases and Analytic Methods (modified schema of Cushing and Loebbecke, 1986) Audit phase Applicable analytic methods Client examination • News media monitoring • Social media monitoring Audit Planning • Ex-ante risk assessment alaCRMA • Ratio analysis Observations A large set of sources allows for environmental scanning of events with directors, their reputation, the behavior of competitors, and events in the industry Peer industry group evaluation for performance Audit risk assessment Internal Control evaluation Compliance testing • CRMA The "material" change in the risk situation requires changes in continuous monitoring, management action, and in continuous audit parameters • Process mining • Analytical modeling • Process mining • CCM Much reliance on the "best of class" nature of designed ERP systems but hampered by the fact that most large organizations’ data is a mix of ERP based and many other sources Concern about user configurable controls requires monitoring these settings through a CCM methodology 15 http://raw.rutgers.edu/audit_analytics_certificate 34
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AUDIT ANALYTICS and CONTINUOUS AUDI
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Notice to Readers Audit Analytics a
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TABLE OF CONTENTS Preface Acknowled
Page 8 and 9: CONTENTS 3 Evolution of Auditing: F
Page 10: CONTENTS B Page Implementing Contin
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Page 16 and 17: AUTHOR BIOGRAPHIES Abdullah Alawadh
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Page 20 and 21: AUTHOR BIOGRAPHIES AICPA Assurance
Page 22 and 23: AUTHOR BIOGRAPHIES management. Prio
Page 24 and 25: AUTHOR BIOGRAPHIES Trevor R. Stewar
Page 26: PART I Essays 1
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ESSAY 4 Reimagining Auditing in a W
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ESSAY 4: REIMAGINING AUDITING IN A
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PART II Case Studies 145
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CASE STUDY B Implementing Continuou
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CASE STUDY B: IMPLEMENTING CONTINUO
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CASE STUDY D Implementing Continuou
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AICPA Assurance Services Executive
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