Authors: Norman Pendegraft; Robert W. Stone; Marla Kraut
Addresses: College of Business and Economics, University of Idaho, 875 Perimeter Drive, MS 3161, Moscow, ID 83844-3161, USA ' College of Business and Economics, University of Idaho, 875 Perimeter Drive, MS 3161, Moscow, ID 83844-3161, USA ' College of Business and Economics, University of Idaho, 875 Perimeter Drive, MS 3161, Moscow, ID 83844-3161, USA
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).
Keywords: continuous audit; traditional audit; auditing technologies; audit function; simulation; internal audit; conceptual modelling; Cobb-Douglas production function; capital; labour.
International Journal of Auditing Technology, 2014 Vol.2 No.2, pp.153 - 166
Available online: 08 Dec 2014 *Full-text access for editors Access for subscribers Purchase this article Comment on this article