Continuous audit for public sector: Supercharge your controls and risk assessment
As a public sector auditor, understanding the concept and significance of continuous audit will deliver benefits and assist you in fulfilling your role. Continuous audit is a powerful approach that brings continuous monitoring and assessment to public sector organizations, enabling proactive risk management and enhancing the overall effectiveness and efficiency of auditing processes.
This introduction will explore the key principles and benefits of continuous audit in the context of the public sector, equipping you with valuable insights for your auditing practices.
How does continuous audit work? How does continuous auditing help you mitigate risk in the public sector, assess the strengths of internal controls, and how can audit management software support you?
What Is Continuous Audit?
Audit usually follows a set timetable or timeline, a cyclical process that takes place to a specific schedule. An auditor or audit team collates data on risks and controls, and publishes findings.
Continuous audit, conversely, is an “always on” audit process.
How Does Continuous Auditing Work?
Rather than a person manually completing audit tasks, continuous audit is supported by technology, using analytics to automatically assess and deliver potential findings at regular intervals and assessing the entire population rather than relying on sampling. This enables constant oversight to augment the traditional audit process and improves the level of risk awareness across the audit function.
When Is Continuous Auditing Used?
Often, continuous audits are focused on ongoing activities and transactions. The continuous audit process provides a quick and early indication of the effectiveness of controls established for these activities in real time — in contrast to traditional audits, which can take place months after a process or activity has happened.
Continuous auditing and monitoring can also bolster audit in priority areas identified by the organization, acting as a second layer of control and assessment for critical processes or functions.
What Are the Benefits of Continuous Audit?
It’s worth exploring the advantages and disadvantages of continuous audit. What are the benefits, and are there any downsides to implementing continuous audit techniques?
Benefits of continuous audit include:
- Errors, fraud or non-compliant activity is immediately detected. Unlike a time-bound audit, the continuous audit process allows any errors, omissions or fraud to be identified swiftly.
- As a result, the potential for harm is minimized. It also makes mitigation and remediation easier.
- The chances of noncompliance are also reduced. This minimizes the potential for reputational damage or financial penalties.
- Audit work can be planned proactively, and auditors’ time managed. A key advantage of continuous audit is that peaks and troughs of demand can be avoided, making the audit process more efficient.
- Up-to-date data is always available. Whether it’s to comply with external reporting requirements or for your own audit reporting, continuous audit gives you instant access to accurate and current data. Dashboards and reports can be prepared faster, and you have assurance that their content is watertight.
- It positions the auditors to provide accountability to oversight bodies. Auditors are asked to provide accountability to those charged with governance and the public. Continuous audit brings auditors close to processes and enables the audit team to recommend improvements, tweaks and remedial actions in a way that timetabled audit does not.
Clearly, there are significant benefits to implementing a continuous audit process. Are there any disadvantages? Potentially, set-up costs and adoption of new technology can be an obstacle. And as with any technology-led approach, interpretation of the results still requires an auditor’s professional judgement and follow-up to ensure the outcomes of continuous audit are realized.
7 Steps to an Effective Continuous Audit
We suggest a seven-step process to help to make your continuous auditing program more rigorous, robust and easier.
1. Establish priority areas
Look not just at new procedures but any other processes critical to your strategy.
2. Determine the rules for your continuous audit process
These are the parameters that guide your monitoring. These rules will need to consider factors like legal or external reporting requirements alongside compliance controls.
3. Decide on the timing of your monitoring
The cadence of your monitoring is something you will need to decide. A cost-benefit analysis, and an assessment of how frequently new data is available, will help to determine your monitoring frequency.
4. Monitor and tweak your parameters
Your continuous audit frequency and rules need to be determined before you start. But they should also be revisited once you’ve carried out continuous auditing for a set period. Consider whether your triggers are set at the right levels; are you overreacting to risks with few costs?
5. Determine your follow-up process
What happens when an error is identified, or an alarm is triggered during the continuous audit process? Who does the alarm flag to? What do they need to do in response? How does the communication process work? Are there steps that should be taken — for instance, to cross-check and verify data — before a trigger is acted on? What is the escalation process? How do you react to triggers and not appear as if you do management’s work? When is an identified risk high enough to require a full audit?
6. Share the results of the continuous audit process
How will you communicate the ongoing findings? At what intervals, and via what means?
7. Identify the tools and technologies that can support you
Robotic processes, artificial intelligence and machine learning are transforming how data is collected and analyzed. Explore their potential to supercharge your data analytics and continuous audit process.
Harness Continuous Audit to Future-Proof Your Audit Process
Audit teams must step up as organizations’ risk profiles grow more complex and challenging. Moving from time-bound reactive audit processes to at-your-fingertips data and insight means capitalizing on the benefits continuous audit can deliver.
Doing this, and making the best use of the technologies that can support you, enables public sector auditors to play a valued role in governance, providing helpful recommendations to the executive leadership and senior management and proactively tackling emerging risks.
Read more in our free eBook, Future-Proofing Internal Audit.
