Principles of Analytic Monitoring for Continuous Assurance

TLDR

New enabling technologies and corporate scandals have spurred the development of continuous assurance, a system that transforms assurance objectives, timing, processes, tools, and outcomes. The paper proposes continuous assurance as a methodology for analytic monitoring of corporate business processes enabled by information technology automation and integration. Continuous assurance employs automated IT and analytical tools such as confirmatory extranets, control tags, continuity equations, and time‑series cross‑sectional analytics. The continuous assurance process yields expanded, evergreen, and future assurances, improves control processes through CA tests, and enhances data integrity.

Abstract

The advent of new enabling technologies and the surge in corporate scandals has combined to increase the supply, the demand, and the development of enabling technologies for a new system of continuous assurance and measurement. This paper positions continuous assurance (CA) as a methodology for the analytic monitoring of corporate business processes, taking advantage of the automation and integration of business processes brought about by information technologies. Continuous analytic monitoring-based assurance will change the objectives, timing, processes, tools, and outcomes of the assurance process. The objectives of assurance will expand to encompass a wide set of qualitative and quantitative management reports. The nature of this assurance will be closer to supervisory activities and will involve intensive interchange with more of the firm's stakeholders than just its shareholders. The timing of the audit process will be very close to the event, automated, and will conform to the natural life cycle of the underlying business processes. The processes of assurance will change dramatically to being meta-supervisory in nature, intrusive with the potential of process interruption, and focusing on very different forms of evidential matter than the traditional audit. The tools of the audit will expand considerably with the emergence of major forms of new auditing methods relying heavily on an integrated set of automated information technology (IT) and analytical tools. These will include automatic confirmations (confirmatory extranets), control tags (transparent tagging) tools, continuity equations, and time-series cross-sectional analytics. Finally, the outcomes of the continuous assurance process will entail an expanded set of assurances, evergreen opinions, some future assurances, some improvement on control processes (through incorporating CA tests), and some improved data integrity.