AUDIT ANALYTICS AUDIT

ESSAY 1: CONTINUOUS AUDITING—A NEW VIEW
Table 1-9: Audit Phases and Analytic Methods (modified schema of
Cushing and Loebbecke, 1986)—continued
Audit phase
Substantive
testing
Opinion
formulation
Applicable analytic
methods
• Cluster analysis
• Database-to-database
confirmations
• Continuity equations
Formal expert systems for
the evaluation of new
forms of audit evidence
Systems for estimating
potential for audit failure
based on internal evidence
and exogenous variables
Observations
The emergence of very large
number of transactions, the ability
to store them online, the reliance
on electronic documents and
records, and the usage of XML
derivative languages to exchange
data from upstream and to
downstream systems changed
drastically the items to be tested
and requires new audit tests that
are not yet in the vernacular
With the multitude of data forms
and volume, and the lack of direct
observability of data, audit
systems will have to be
substantially automated with a
symbiotic process of opinion
formulation partially relying on
machine observation and opinion
formulation
4.8 Assurance Entity
Different ALOs have a mix of complementary, independent, and
overlapping objectives. Assurance coordination, as recommended to be
implemented in the King report, must take into consideration the
evolving variables discussed in this section: (1) assurance level, (2) time
focus, (3) data source, (4) chosen procedure, (5) chosen assertion, (6)
analytic method, and (7) the specific issues and objectives of the different
assurance entities. Organizing a matrix of the above variables, ALOs, and
technology platforms can help to create a more efficient assurance
function.
5. QUESTIONS REGARDING SOME AUDITING
CONCEPTS IN THE MODERN ENVIRONMENT
The speed of technological change is overtaking the ability of business to
change and of the multiple lines of defense. The inherent opacity of the
layers of technology opens exposures at the same time that it creates
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