India

Continuous Auditing / Continuous Monitoring 

As organizations aim to address the rapidly evolving and often complex risk environment and meet ever-changing regulatory, business, and industry requirements, leaders are searching for innovative ways to efficiently meet corporate objectives. Many have begun to advance their efforts by implementing continuous auditing (CA) and continuous monitoring (CM) solutions to monitor their organizational processes, transactions, systems, and controls.

Leveraging proactive, technology-based applications to manage performance and key areas of risk and control has become a practical and necessary alternative to meet the growing needs of the organization. Together, CA and CM offer a broad range of benefits that can help organizations add value and improve business performance. CA/CM can deliver regular insight into the status of controls and transactions across the global enterprise, enhancing risk and control oversight capability through monitoring and detection.

What Is Continuous Auditing and Continuous Monitoring?

 


Across organizations and industries, while the definitions may vary, the goal of CA/CM is to provide greater transparency into the operations and timelier reporting of concerns.
 
Continuous auditing consists of the automated collection of audit evidence and indicators by an internal or external auditor from an entity’s IT systems, processes, transactions, and controls on a frequent or continuous basis. This information enhances auditor capabilities and helps to ensure compliance with policies, procedures, and regulations. In many cases, CA can act as an early warning system by detecting control failures on a timelier basis than traditional approaches.
 
In contrast, continuous monitoring is an automated feedback mechanism for management to ensure that the systems and controls have been operating as designed and transactions are processed appropriately. Management can utilize this information to set business rules or tests, using analytics to identify performance gaps or unusual transactions that may suggest control failures. CM allows management to have greater visibility into the organization—enhancing capabilities and entity-level controls while maintaining optimal performance.

 

 

Common drivers for CA/CM implementations

 

CA/CM strategy is influenced by a variety of drivers. Strategic drivers include the pressure to improve governance, a need to improve performance and accountability, as well as the ability to get better visibility into global operations. Operational drivers include the occurrence or risk of fraud and misconduct, Enterprise Resource Planning (ERP) conversion, and the desire to make optimal use of IT investments. External drivers include the expanding regulatory and risk environment, scrutiny from rating agencies, and an uncertain economic environment.

How can organizations benefit from CA/CM?

 


In addition to ever-increasing technology and regulatory requirements, many organizations are looking to remove excess costs from operations and improve efficiency, improve controls and processes, and prevent and detect fraud/misconduct.
 
In  supporting an organization's efforts to address these objectives, CA/CM can  offer considerable benefits, such as:

  • Delivering regular insight into the status of controls and transactions across the global enterprise
  • Enhancing overall risk and control oversight capability through early detection and monitoring
  • Using automation to efficiently test a broader range of transactions and controls
  • Reporting value to your board and C-level management

Why are many organizations implementing CA/CM?

 

The  goal of implementing CA/CM is to enhance the overall visibility of the  organization to risk and performance through the effective use of technology.  Understanding the organization’s risk profile is fundamental to implementing  CA/CM. By assessing the risks, leaders can then decide priorities and direct  resources to those areas that are most important to the business, resulting in:

  • Greater audit efficiency and effectiveness
  • Enhanced internal controls and improved performance
  • More timely information to expedite response and cost reduction
  • Greater transparency and a reduction of complexity.

 

 

For more information about Continuous Auditing/ Continuous Monitoring, please contact Raajeev Batra, Partner and Head of Project Advisory Services, at rbbatra@kpmg.com