Conceptually modelling the trade-offs between continuous and traditional auditing. (9th December 2014)

• Record Type: Journal Article
• Authors: Pendegraft, Norman; Stone, Robert W.; Kraut, Marla
• Is Part Of: International journal of auditing technology. Volume 2:Number 2(2014)
• Page Start: 153
• Page End: 166
• Publication Date: 2014-12-09
• Subjects: continuous audit -- traditional audit -- auditing technologies -- audit function -- simulation -- internal audit; Information storage and retrieval systems -- Accounting -- Periodicals; Computer security -- Management -- Periodicals; Information technology -- Auditing -- Periodicals; 657.450285
• Languages: English
• ISSNs: 1757-8752

Abstract

Continuous auditing (CA) has been of significant interest in recent years. The focus of CA in this research is in its use in the internal audit function. Specifically, the research examines the factors influencing an organisation's mix of CA and traditional audit techniques in the internal audit function. A theoretical model is proposed based on a Cobb-Douglas production function using the capital variable to represent continuous internal audit techniques and labour the use of traditional techniques. A series of simulations are performed providing evidence that the conceptual model of CA adoption has face value validity. The optimal mix of capital (CA) and labour (traditional) for the organisation, given a budget restraint is generally not an all or nothing proposition. Mathematically, the percentage of the budget spent on these two forms of auditing techniques depends on the elasticity of substitution between labour (traditional auditing) and capital (continuous auditing).