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Benedetto Bongiorno CPA, CRELynford Graham CPA, PhD, CFE
Continuous Audit As In Frequently Periodic To Continuous Monitoring
Development of Audit Expectations Detection & Testing of Risks Controls Extensive Use of Substantive Analytical
Procedure (SAP) Efficient Integration of SAP, Sampling &
Testing of Controls
• Review Documentation of Internal Control• Review of Automated and Manual Controls• Verification of Stationary Sequential Events• Verification of Non-Stationary Sequential
Events• Independent ODBC /JDBC Connection to DBS• Import Records For Current & Previous Periods• Based On Company Operations, Combine Into
Equally Spaced Events Days, Months, Quarters
Segregate Records Into Financial Statement Segments - Assets, Liabilities
Segregate Segments Into Financial Statement Categories - Cash, Revenue
Segregate Categories By Debits and Credits
Segregate Debits and Credits By Sources of Transactions
Cross Reference Sources To Processes (Cycles)
Segregate Sources of Transactions By Stationary & Non-Stationary Events
Reference Sources of Transactions By Automated & Manual Controls
Apply Appropriate Regression Model To Each Group
Establish Audit Expectations For Periods Under Audit
Update Documentation
Based on Company and Industry Information
Works Best With Discrete, Sequential, Successive & Equally Spaced Data Produced With Automated Processes
Algorithms That Are Multifaceted Variations of ARMA
Different Models For Different FS Categories
Does Not Replicate History But Anticipates Results
• Sequential Automated General & Administrative Expenses - Historical Debits
• {Period, Source, Monthly Total},• {{200601}, AP, 392,907.11},• {{200602}, AP, 416,209.05},• {{200603}, AP, 681,756.33},• {{200604}, AP, 541,760.38},• {{200605}, AP, 863,814.03},• {{200606}, AP, 518,772.63},• {{200607}, AP, 405,766.90},• {{200608}, AP, 483,285.86},• {{200609}, AP, 450,928.49},• {{200610}, AP, 437,524.51},• {{200611}, AP, 506,150.81},• {{200612}, AP, 792,556.24}
• Sequential Automated General & Administrative Expenses - Audit Expectation Debits
• {Period, Source, Monthly Total Expectation},• {{200701}, AP, 557,926.36},• {{200702}, AP, 546,124.97},• {{200703}, AP, 534,323.58},• {{200704}, AP, 522,522.20},• {{200705}, AP, 510,720.81},• {{200706}, AP, 498,919.42},• {{200707}, AP, 487,118.03},• {{200708}, AP, 475,316.65},• {{200709}, AP, 463,515.26},• {{200710}, AP, 451,713.87},• {{200711}, AP, 439,912.48},• {{200712}, AP, 428,111.09}
Non Sequential Manual General & Administrative Expenses - Historical Debits
{Period, Source, Monthly Total}, {{200609}, AD, 509,152.15}, {{200612}, AD, 20,944.81}
{Period, Source, Monthly Total}, {{200604}, AL, 953.58},
{{00605}, AL, 14,970.82}, {{200609}, AL, 323.24}
Non Sequential Manual General & Administrative Expenses - Audit Expectations Debits
{Period, Source, Monthly Total Expectation}, {{200709}, AD, 265,048.48}, {{200712}, AD, 265,048.48}
{Period, Source, Monthly Total Expectation}, {{200704}, AL, 5,415.88}, {{200705}, AL, 5,415.88}, {{200709}, AL, 5,415.88}
Is It Presently Used In Audits? [YES] Is The Process Truly Continuous? [YES] Is This a Silver Bullet For All Audits? [NO,
Must Be Tailored By Specifics of Industry and Company ]
Is It An Efficient Way To Audit? [YES, Time Efficient & Cost Effective]
Is It a Effective Way To Integrate New SAS & AS Pronoucments Into Audits? [YES]