Cloud technologies have enabled dramatic improvements in data acquisition, processing and analysis techniques in recent years. This allows auditors to process and analyze large volumes of data in a shorter amount of time, which has led to the rise of continuous auditing. In fact, technology now allows almost real-time auditing.
Continuous or more frequent auditing will likely become more common for auditors in the future, and should allow them to spend more time on crucial judgments. Utilizing automation, enables the quick detection of issues that previously would have only been picked up in a single audit at the end of the financial year. By providing these more timely insights, we believe continuous auditing has the potential to make a significant impact on earlier identification of risk throughout the audit.
To look at continuous auditing in more depth and understand how organizations can benefit, I spoke with two colleagues from KPMG in France: Xavier Niffle, Technology & Innovation Audit Partner and Albane Liger-Belair, Associate Director, Innovation. Here’s what we covered.
How can continuous auditing change the audit and the way auditors work?
Continuous auditing is a process that examines accounting practices, risk controls, compliance, information-technology systems and business procedures on an ongoing basis. It reflects an evolution of the audit from a point-in-time execution to something that stretches across the financial year in iterations. This is facilitated by more readily available data and the more frequently executed digital audit procedures.
Continuous auditing typically has the following components:
- Continuous risk, control and transaction monitoring
- Investigation of potential inappropriate activities
- Continuous reporting to stakeholders
These activities are possible thanks to automation, which allows auditors to collect audit evidence and indicators from an entity’s IT systems, processes, transactions and controls on a frequent or continuous basis. This information enhances auditor capabilities and helps ensure compliance with policies, procedures and regulations. In many cases, it can also act as an early warning system to detect control failure, transaction errors, and other new issues in a more timely manner than under traditional approaches – and potentially in almost real time.
KPMG firms believe continuous auditing is likely to smooth the audit effort and reinforce audit quality, introducing a more dynamic and iterative approach to the audit process. Rather than conducting a single audit at the end of the financial year, auditors are able to continuously monitor and evaluate a business’s data throughout the year.
How can continuous auditing impact businesses and specific industries?
Potentially, the biggest benefit continuous auditing offers to companies (and industries as a whole) is the ability to leverage technology to more efficiently analyze data on a frequent basis. 24/7 access to KPMG’s audit platform KPMG Clara gives businesses the ability to stay informed in near-real time once process or control weaknesses are identified.
By detecting anomalies, outliers, inconsistencies and other factors more quickly, businesses can efficiently focus on audit resources and improve risk and control assurance. Not only does this increase the level of risk migration for business risks, but it reduces costs – including internal audit costs. Audit cycles are shortened and internal audit coverage expanded with minimal or no incremental cost.
Looking at the bigger picture, continuous auditing can deliver regular insight into the status of controls and transactions across the global enterprise, enhancing overall risk and control insight capability for the entire organization. Using automation to efficiently test a broader range of transactions and controls, auditors may also help to improve reporting value to their board and C-level management.
What are the potential risks of continuous auditing?
It’s difficult to see any risks to continuous auditing. However, the deployment end of a continuous audit approach depends on the ability of businesses to provide qualitative data, which depends on the maturity of their system processes and controls.
How is KPMG adapting to continuous auditing?
KPMG sees continuous auditing as facilitating better relationships with the organizations who work with us, as it enables ongoing anticipation, communication and action that brings significant added value. That’s why KPMG firms are investing in enhanced technologies that enable an ever more continuous audit approach. Many steps of the audit are already happening prior to the end of the financial year for the entity audited. With the help of technology, they can now occur in more frequent iterations and increasingly in real time.
Throughout the All eyes on campaign, we’ll be sharing more from various global leaders on topics including AI, big data and technology assurance. If you’d like to learn more about how KPMG can help your organization realize the benefits of these technologies, please email me or the below subject matter experts directly.