E-Auditing Meaning, Uses and Limitations
by Electronic auditing, or e-auditing, is computer-assisted auditing that uses electronic records to complete part or all of your audit. This follows similar procedures as a traditional audit but using electronic means to remotely perform the audit. E-auditing is also known as Remote Auditing.
For any number of reasons, having an assessor physically inside your walls for an assessment can prove needless with certain types of audits. Of course, it’s preferable, if not mandatory, depending on the nature of the audit, but we’re also moving into a period of time where technology has enabled new types of audits that often don’t require their presence.
An e-audit is a systematic, independent, and documented process to obtain evidence through electronic means to determine the extent of conformity to the audit criteria. The use of e-auditing is increasing because so much of the technology we use in our daily lives connecting with friends on Skype, finding jobs through LinkedIn, or attending online classes is done over the Internet. These activities become a gateway to enhancing and applying online communication techniques. The more familiar we become with technology, the less anxious we feel about its interactive uses.
Validating an e-audit relies on the technology used and the auditor’s skill to facilitate a virtual meeting while coordinating with the remote location to find nonconforming evidence. This coordination of events is not an easy task without technical grounding in information technology and facilitation skills. Realistically speaking, a fair amount of registration auditors is limited in this area due to their intense travel schedules. At best, they are passive listeners in “all hands” online meetings. This is not a reason to stop conducting internal audits virtually. Note that ISO 9001:2015 itself and its requirement to understand the context of the organization seems to be a tacit endorsement of the e-auditing process.
ISO 9001:2015 provides an illustration of how complex businesses have become to compete in a global market to offer affordable products. For example, products that contain batteries often make headlines.
Uses
Tracking Ability
Most paperless audit systems offer reporting and tracking abilities throughout the auditing process. Managers from the company being audited as well as the auditing firm’s management can easily track and monitor each step in the review process. This increased tracking may help streamline resource requirements and helps manage the auditing timeline. Tracking and time management can be essential, especially for public companies with SEC-mandated reporting deadlines.
Accessibility
Companies that opt for a paperless audit can provide increased accessibility to financial documents and statements for auditing personnel. Increased accessibility can decrease the amount of time required by accounting and financial staff to provide documents to auditors. Depending on security requirements, accessibility may allow auditors to conduct their review from outside the business facility.
Less Waste
Reducing the need for duplicate copies of financial documents, storage facilities and office supplies can reduce the amount of waste both companies generate. Paperless audits use less paper, ink toner, electricity and office supplies than a traditional paper-bound audit. The reduction in paper and associated supplies can offer cost savings and an ecological benefit. This green focus may be important for companies that want to promote their company as being environmentally-friendly.
Increased Security
Physical documents are more difficult to secure than electronic documents. Electronic data and documents can be secured through passwords and other digital security methods. An electronic tracking system can also notate who has reviewed each data element for security review purposes. Physical documents can be copied, lost, or placed in an unsecure location. A paperless audit increases the security of a company’s financial system.
Limitations
Different Filing Requirements
The Internal Revenue Service and other government agencies may have different rules for electronic record keeping than for paper record keeping. Business owners should find out how to store audit reports and for how long they must store them prior to agreeing to an electronic audit. In addition, although electronic audits are often called “paperless,” some paperwork may need to be printed to fulfill government record-keeping rules.
Requires Technology
Auditors must be comfortable using computer software to create audit reports. If an auditor is not familiar with computers or with the software he is expected to use, he may have a steep learning curve. Auditors also must be familiar with using email or websites and uploading attachments, while business owners must be able to retrieve audit reports from their email or by going to a website.
Changing Over Systems
If a business relied on paper audits before, it has to switch over to an electronic system before it can begin taking advantage of paperless audits. This may take weeks or months, depending on how computer-based the business was before it switched over. In addition, some personnel may require training to access or use the new system. Thus, it can take a year or more for a business to switch over to a paperless system.
Security Considerations
If an auditor is going to use computers or other technology to prepare an audit, she must consider security factors that auditors who create paper reports don’t have to consider. Audits often refer to sensitive information, such as a business’ finances or tax requirements. Auditors must be able to send this information securely; only employees of the company who need to know the information in the report should be able to access audit reports online or via email.
