AUDIT ANALYTICS AUDIT

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ESSAY 1: CONTINUOUS AUDITING—A NEW VIEW data evaluation and review. In the engineering sciences the concept of relative and acceptable errors are common. Unfortunately there are no precise definitions of materiality in the auditing standards literature (Elliott, 1986). Furthermore, information technology has changed the cost structure of both the benefits of an audit as well as the costs of performing audits by making information storage and retrieval very different. The new environment changes the costs and benefits of assurance. Source documents are indexed and electronic. Analysis activities can be mainly automated. A wide net of automatic document reviews can be communicated to staff and serve as a serious deterrent to malfeasance. If auditor substantive processes can be formalized and support systems evolve towards all electronic processes, full population evaluations may be possible and desirable depending of a set of very different cost-benefit tradeoffs. A new conceptualization of materiality may be needed now with different considerations of dimensions such as monetary value, volume of transactions, type of usage, and probability of outcome. Furthermore, for the audit to be more informative, it may be desirable to disclose more details of relative expected error and the auditor may create a product that provides a more detailed set of relative error assessments. Furthermore, there are qualitative and quantitative aspects in audit decision making, as many of the analytic-based monitoring processes will be out of the eyesight of the auditors, there must serious thought given to automatically bringing relevant qualitative evidence to auditors. 5.2 New Audit Products The creation of new digital products has faced a Cambrian moment (Siegele, 2014) of dramatic change where the cost characteristics of e-products (mainly fixed cost and very low marginal variable costs) are being reflected by the method of provisioning and charging for new products. Auditors need to develop layered monitoring systems with embedded elements such as sensors (for example, RFID, GPS, computer vision), analytic intelligence, and exception detecting and rerouting capabilities in order to provide additional assurance services. Table 1-10 expands the conceptualization of the audit opinion and table 1-11 adds features that could be parts of the nature of the product. Clearly, unintended consequences and the legal environment would permeate the world of expanded assurances. 37
AUDIT ANALYTICS AND CONTINUOUS AUDIT:LOOKING TOWARD THE FUTURE Table 1-10: Expanded Opinion Conceptualization We have The For the period And we found Examined Financial statements Year Materially correct Monitored Account Month Reliable to the 99% level Analyzed Transactions Continuously or close to the event or in the appropriate frequency The enclosed exceptions for the period Prepared Controls The following alerts in the attached URL Reported Process Correct with an acceptable error rate of 1% Reported and verified Outsourced process Shared examinations Automated decision settings Security of user information such as social security numbers and passwords The settings to be adequate to perform the continuous assurance function The system vulnerable to serious attack 5.3 Management, Control, Assurance, and Other Meta-Processes Confusion of Concepts It may be overambitious to attempt to resolve the confusion generated by the expansion of functions taken over by technology and their effect on the "lines of defense" discussed earlier in this essay. It suffices to understand that internal and external business related functions aim to achieve corporate objectives. The nature of the objective, the characteristic of job functions, the type of technology progressively being used, and the nature of the contractual relationship with vendors, assurers, suppliers, and customers will affect several management controls and assurance functions. The historically evolved set of rules and regulations that permeate the environment rely on definitions that may not be relevant in this age of automation and piggybacking (Siegele, 2014) of technologies and processes. Some examples of concept confusion include the following: 38
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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
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CONTENTS 3 Evolution of Auditing: F
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CONTENTS B Page Implementing Contin
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Page 16 and 17: AUTHOR BIOGRAPHIES Abdullah Alawadh
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AICPA Assurance Services Executive
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