Continuous auditing for web‐released financial information

Abstract

PurposeThe increasing provision of timely financial information through web‐based technology is expected to improve the quality of communication between a company and its stakeholders. However, the information asymmetry problem still exists since almost all “web‐releases” usually remain unaudited. The purpose of this paper is to propose conceptual and technical frameworks of continuous auditing to provide a solution for this problem. This solution could also move the traditional auditing forward to the new e‐auditing generation.Design/methodology/approachThis paper develops a conceptual framework to present why continuous auditing would dominate other auditing approaches in examining web‐based financial information. Using a 3 × 2 × 2 × 1 design, this study compares the economic efficiency of three auditing approaches under the joint‐combination of various disclosure types, materiality perceptions and information environments. A technical framework, the external continuous auditing machine, is derived from the conceptual framework to specify the generic procedures to perform the online control testing and the continuous substantive testing over web‐releases.FindingsContinuous auditing issues are scrutinized both theoretically and technically. Two main conclusions arise. First, the behavior model simulates various information disclosing and auditing environment and argues that the continuous auditing would be the most appropriate approach for web‐releasing assurance. Although the hypothesis derived from that model still needs further empirical supports, the anticipated sustaining is quite reasonable under the emergent web‐release practice.Originality/valueGiven the new era of online, real‐time business reporting, constructing a theoretical model and applying it to develop a technical model for implementing continuous audits for web‐releases provide significant contributions to the accounting/auditing professionals as well as researchers.

The Impact of E-Business on the Audit Process: An Investigation of the Factors Leading to Change

“…However, inevitably many of the risks, controls and testing procedures will significantly change with the introduction of e‐business (Arens & Loebbecke, 1976; APB, 2001; Glover et al ., 2001; Moscove et al ., 2003; Abu‐Musa, 2004; Hunton et al ., 2004; Chou & Chang, 2010). For example:…”

“…These findings echo those reported in Table 8, where more than half of the respondents indicated that they thought audit timing would not significantly change in response to e‐business (52.2 per cent report 1 or 2, mean 2.48). Thus, many of the respondents appear not to agree with the literature which stresses the importance of real‐time auditing techniques (see, for example, Helms & Mancino, 1998; Cosserat, 2004; Hunton et al ., 2004; Chou & Chang, 2010).…”

“…XBRL and XML), and other software also enabled businesses to report information on a real‐time basis (see, for example, Shields, 1998; Rezaee et al ., 2000, 2001; Braun & Davis, 2003; Zhao et al ., 2004). Consequently, the need for new IT‐driven audit techniques has increased (Helms, 2002; Shaikh, 2005; Coe, 2006; Du & Roohani, 2007; Chou & Chang, 2010; Masli et al ., 2010). Wider economic pressures on audit clients were also a major force for audit change.…”

“…This, in turn, has altered the entity's risk profile and associated mitigating processes (Glover et al ., 2001; IFAC, 2002; CICA, 2003; IIA, 2003; Chatzoglou & Diamantidis, 2009). Thus, it is doubtful that conventional financial audit practices and techniques are appropriate for such businesses (Chou & Chang, 2010).…”

“…In an integrated web‐based business, economic transactions are captured, measured and reported on a real‐time basis without either internal human intervention or paper documentation. In turn, information produced by these systems needs to be audited on a real‐time basis (Chou & Chang, 2010).…”