Cybersecurity and Continuous Assurance

Abstract

The evolution of the double entry accounting model (Pacioli 1494;Sangster 2016) was based on the business practices of Venetian traders at the time, and focused on physical assets as well as debt including credit. The operations of many businesses were run on transaction records and accounting to secondary owners using those records. In the United States, the Great Depression motivated the Securities Exchange Act of 1934, which requires publicly traded companies to file their financial reports based on Generally Accepted Accounting Principles (GAAP) with the Securities and Exchange Commission (SEC). These reports are accompanied by an attestation of fair representation by independent auditors. Early market studies (e.g., Ball and Brown 1968) found a high relationship between stock market valuation and accounting values. Five decades later, Lev (1989) reported that adjusted R 2 s find that accounting variables explain substantially less of corporate market values. Lev (1989) argues that traditional financial variables need to be supplemented by nonfinancial variables such as the value of human resources, intellectual property, supply chain, and brand. A substantive body of literature has evolved arguing for expanded reporting that includes these measures, and even the incorporation of sustainability measures (e.g., integrated reporting-Eccles and Krzus [2010]; sustainability reporting-Schaltegger, Bennett, and Burritt [2006]). Furthermore, organizations now run their businesses with a plethora of data drawn from their Enterprise Resource Planning (ERP) systems. This creates an environment where traditional financial numbers are mainly used for corporate compliance and not management decision making. Consequently, the assurance of traditional numbers that are not being actively utilized in corporate management and progressively less used in investor decisions has limited value. A Different TechnologyAutomated trading accounts for at least 75 percent of corporate stock trades (Prakash 2016; Bute 2016) and is often affected by changes in stock price and volume over very short time intervals and not by any intrinsic economic performance data (Demos 2012;Wigglesworth 2016). Variables such as inventory (for just-in-time management), overnight cash balances The authors are thankful for the helpful comments and advice of Dorothy McQuilken, Chris Halterman, Andrea Rozario, and Jamie Freiman during the formulation of this editorial.Published Online: July 2017 1 ISA 701 (https://www.ifac.org/publications-resources/international-standard-auditing-isa-701-new-communicating-key-audit-matters-i ) requires the disclosure of key audit matters that open the opportunity of a less binary opinion. Key audit matters pertain to matters the auditor deems to be of the most significance (e.g., complex revenue transactions, tax-related matters, goodwill impairment) in the audit of financial statements of the current period. The auditor is required to communicate on the audit report the matters that require significant judgment, the types of...

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