Audit Automation As The Foundation of Continuous Auditing

Audit Automation as the
Foundation of Continuous
Auditing
The Case for Audit Automation 2
• Automation of business processes
• Labor-intensive repetitive audit work
• Cost and availability of qualified audit personnel
• Budgetary pressure on internal audit departments
• Complexity of business transactions and increasing risk
exposure
• Scale and scope of audit procedures
• Timeliness of audit results
Audit Automation Work Sequence 3
• Identification and engagement of stakeholders:

• Business process owners
• IT personnel
• Internal auditors
• Composition of audit automation teams
• Automation of audit procedures
• Duplicate automation is ideal but too expensive
• Verification of automated procedures
• Independent verification by experienced auditors
• Approval of automated audit program
Formalizing the Audit Program 4
• Automation requires formalization

• Formalized is usually automatable
• Possibility of formalization is often underestimated
• Benefits of formalization:
• promotes precision and consistency
• improves confidence in audit results
• Reduces long-run audit costs
• Problems with formalization
• Many humans resist formal thinking
• Formalization can be very laborious and costly
• Certain complex judgments are not amenable to
formalization
Re-engineering the Audit Program 5
• Conventional audit programs are not designed for

automation
• Formalizable and judgmental procedures are often
intermixed – redesign is required to separate them
out
• Re-engineering objective: maximize the
proportion of automatable procedures in the audit
program (i.e., reduce reliance on informal
judgmental techniques)
• Substitution of high frequency (“continuous”)
automated procedures for eliminated manual
methods
Continuous Auditing (CA) as Implementation 6
of
Automated Audit
• Formalized audit procedures are programmed into an
automated audit system that can run continuously
• CA = CCM + CDA
• Continuous Control Monitoring (CCM):
• Access Control and Authorizations
• System Configuration and Business Process Settings
• Continuous Data Assurance (CDA):
• Master Data
• Transactions
• Analytics (including Continuity Equations)
Baseline Monitoring (Baselining) 7
• Traditionally used in configuration management

and IT security
• Baseline – a snapshot of system configuration and
business process settings
• Deltas from baseline  exceptions
• Critical issues:
• Definition of baseline (the more static parameters are,
the better they are suitable for baselining)
• Initial verification of baseline values
• Security of baseline (both definition and current
values)
• Accumulation of deltas  redefinition of baseline
Scalability of Audit Automation 8
• Automation of highly specific audit procedures for

different enterprise units can incur prohibitive
costs
• Automation will be scalable across the enterprise
only if the repetitive audit procedure automation
costs are eliminated
• Strategies for making audit automation scalable:
• Hierarchical structuring of automated audit
procedures – from the most generic audit procedures
applicable across the enterprise to the more specific
ones for major units and subunits
• Hierarchical updates
• Parameterization of automated audit procedures
Architecture of Automated Audit 9
• Organization of audit software:
• integrated software – vs.
• distributed (i.e., multi-agent-based) system
• Access to the enterprise system and data:
• Direct (either to the database or to the application layer)
• Intermediated (through a business data warehouse)
• Platform of audit software:
• Common enterprise platform (EAM – embedded audit module)
• Separate platform (MCL – monitoring and control layer)
• Providers of audit software:
• Common platform – enterprise software vendors
• Separate platform – 3rd party vendors and audit firms
Mobile Agents in Automated Audit 10
• Mobile agents can be transported to the enterprise

platform to be run there (as EAM!)
• Benefits of mobility (and EAM):
• Protection against network connectivity outages
• Event-triggered execution of audit procedures  potentially zero
latency (not affected by network congestion)
• More efficient for processing large volumes of enterprise data (on
site – vs. moving that data over the network)
• Problems with mobility (and EAM):
• Protection of enterprise platform against (possibly malicious) agent
• Protection of agent against possible manipulation by the platform
• Impossibility of protecting the agent outweighs the
benefits!
Securing Continuous Auditing 11
• Location of continuous auditing hardware:

• client’s premises
• audit shop
• Physical access security
• Logical access security
• Super-user privileges
• Client’s IT personnel access
• Export / import of CA system settings
Software for Audit Automation 12
• ACL
• CaseWare IDEA
• Approva
• Oversight Systems
• Governance, Risk, and Compliance Solutions:
• SAP GRC Access Control, Risk Management, Process Control (VIRSA)
• Oracle Governance, Risk, and Compliance (LogicalApps)
• IBM Workplace for Business Controls and Reporting
• Paisley Enterprise GRC
• OpenPages
• AXENTIS Enterprise
• BWise
• Protiviti Governance Portal

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Audit Automation as the

• Identification and engagement of stakeholders:

• Automation requires formalization

• Conventional audit programs are not designed for

• Traditionally used in configuration management

• Automation of highly specific audit procedures for

• Mobile agents can be transported to the enterprise

• Location of continuous auditing hardware:

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