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Demand for Continuous Assurance

Continuous assurance (CA) refers to a system for monitoring and evaluation of a corporate business process. A continuous assurance relies heavily on the integration and automation of business processes resulting from information technologies. As Alles and his colleagues found out, adoption of continuous assurance is mostly strained by the demand rather than the supply of the relevant technologies. With the revelation of some of the corporate scandals and adoption of injurious acts like the Sarbanes Oxley, the demand for continuous assurance has faded further. Continuous assurance audit environment is only expected to emerge with the intersection of changes in supply, demand and technology. This paper discusses how demand influences continuous assurance in the corporate environment.

The supply, demand and technology for continuous assurance are referred to as the three co-determinants. The speed of expansion and possibility of change for these co-determinants influence the deployment of continuous assurance. The demand for continuous assurance has been exacerbated by poor regulations and legislation, complex organizations and more integrated business processes in the new economy. A number of management, as well as control information needs, are in the corporate system. These needs can not rely on traditional financial audit systems but on continuous assurance systems. In summary, there is increased demand for continuous assurance concerning; industry and environment dynamics, rising risks in human resources, evident effectiveness of the controls, demand for outsourced processes use, need to blend exogenous and endogenous factors and the integrity of the process.

For the past years, basic economic changes in the industry and corporate environments have acted as barriers to growth. This has been fuelled by lack of capability by the management to handle these changes. The worst affected sectors are loans & savings industry and telecom industry. The solution to these barriers was developed by Vasarhelyi & Kogan. They developed a methodology that can serve as an early warning for major environmental changes. In the recent past, there has been a paradigm shift in the nature of modern business control. With the emergence of IT-based ERP systems, the nature of controls has rapidly changed. Being that modern controls are computer-based, they require regular assurances on their operations, quality and comprehensiveness.

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Persistent personnel changes in the corporate world could serve as a major cause for system instability. With continuous assurance systems in place, fraudulent patterns can be monitored for any potential danger. Outsourcing may be popular in the corporate world but according to analysts’ views, it hampers the natural flow in the corporation chain values. Continuous assurance is accompanied by “along and across” value chain monitoring methodologies that help preserve the corporate integrity. On the process integrity, continuous assurance has replaced traditional audit systems that could not examine macro-process integrity. The modern continuous assurance is helpful in analytical examination and rational modeling for achievement of assured macro-process integrity.

Usually, organizations in a given industry usually operate within some coherent industry statistics. This means that the industrial operating ratios fall within a given predictable range. The modern time economy offers the extended range of measurements, reference points and standards for the examinations. These are only possible with continuous assurance; persistent measurements increased sensors, the intensive and thorough collection of statistics, and acceptable measurements and standard approaches. Of these three co-determinants, demand for continuous assurance needs to be handled swiftly and critically to enhance modernized corporate environment.