Continuous auditing and its applicability to the internal audit function of Maltese companies

Abstract

PURPOSE – The purpose of this study is to assess the Internal Audit Function (IAF) of Maltese organisations’ willingness and readiness to adopt Continuous Auditing (CA) and determine the main barriers of implementation of CA faced by companies. Moreover, the research assesses the change in the role of the auditor following its implementation and what the future holds for CA locally. DESIGN – A qualitative approach was employed for the purpose of this research to reach the objectives of this dissertation. Ten interviews were held in total. These consisted of eight (8) internal auditors (IAors) from large-sized organisations and two (2) IAors from Big Four audit firms. FINDINGS – This study finds that IAors demonstrate a good understanding of CA. Whilst none of the organisations have implemented CA, they are not averse to the idea that the structure they have in place allows the development of the structure required for CA. No correlation was found between the size of the organisation and audit frequency and it was determined the number of audits carried out was mainly based on management’s risk appetite. The main barriers faced by organisations for CA adoption were lack of management buy-in, limited resources, access to data and personnel’s resistance to change. The majority of the respondents do believe that there is a need for CA inside their organisation. Five (5) Internal Auditors (IAors) asserted they would consider a pilot implementation to mitigate some of the challenges imposed by CA’s implementation. Lastly, all IAors agreed that automation will play a major role in keeping pace with the company’s operations. The IAors’ perceived that their role will transition more to a trusted advisor, being involved in corporate social responsibility activities and being a partner for the business. CONCLUSIONS – Clearly, this study shows the views on CA are divided, which may explain why it has not been introduced in organisations as predicted years ago. This study concludes CA is not applicable for every IAF and it is best suited for larger organisations with a large volume of transactions and are more technologically-driven. Moreover, in the future, CA could be valuable in enhancing the relationship between the second and third LOD in organisations. VALUE – This study aims to provide new insights into how organisations are adapting their IAFs with ever-increasing amounts of data being generated. Since many processes are becoming automated, and transactions increasing on a daily basis, the IAF can essentially benefit by normalizing processes and reduce manual intervention. It is hoped that this research will contribute to identify any existing deficiencies, and thus enable IAFs to render them as improved vehicles for their development.