Continuous Auditing and Sarbanes Oxley Act Term Paper

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auditing and Sarbanes-Oxley Act

It is widely agreed nowadays that business and the general audit environment is fast and is going on in real-time. In this sense, the traditional financial reports and the traditional audit style may sometimes prove not enough, because they lack the essential thing in today's business environment: updated information. In this sense, continuous auditing seems to be getting more and more followers.

The theoreticians in the matter seem to define continuous auditing differently, however, most of these definitions share a common basis. As such, continuous auditing can be defined as "a systematic process of gathering electronic audit evidence as a reasonable basis to render an opinion on fair presentation of financial statements prepared under the paperless, real-time accounting system" (Rezaee et al. (2001, 151)), while the North American accounting bodies (CICA and AICPA) define continuous accounting as being "a methodology that enables independent auditors to provide written assurance on a subject matter using a series of auditors' reports issued simultaneously with, or a short period of time after, the occurrence of events underlying the subject matter."

Looking at these two definitions, there are several things that are common to both. First of all, the concept of real-time, thus expressed in the first definition, and paraphrased in the second with the mention of reports issued simultaneously or a short time after the events.

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The second, even if not mentioned in the second definition, refers to electronic gathering of data and events, the only means to provide a proper audit process.

The first incentive for continuous auditing has already been mentioned in the opening statement and involves the pace at which business is being done today: continuous business requires continuous auditing. A second driver for continuous auditing has been brought about by the audit scandals that have been going on at the beginning of this century. It was only normal that the business community and the regulatory committees should be concerned to avoid such events in the future. Continuous auditing creates the right premises and transforms the auditing process from "an archival activity that is performed at the end of a month, quarter, or year to a process that could be done on a continuous, nonstop basis." This system may thus be able to stop and prevent illegal financial transactions because it will mean checking them on a real-time basis.

Thus, we can summarize some of the drivers of continuous auditing as a better monitoring of financial issues within a company, ensuring that real-time transactions also benefit….....

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