Think about the last photograph you took. It’s a rich record of a specific point in time, a snapshot of who, what, when and where.
But there’s a lot missing as well. This includes what happened before the photo was taken, what happened afterward and all of the detail outside of the frame providing insight into how, why and what’s next.
Traditional approaches to audit present similar limitations.
Like snapshots, sample testing of internal controls, put audit teams in danger of missing important anomalies and issues. Static registries and cyclical reports restrict leaders to a retrospective, rather than future-focused, view. Throughout, issue tracking and remediation via other traditional methods, namely disparate spreadsheets and manual processes, hinder follow-up.
Today’s environment of rising risk and heightened scrutiny demands a more proactive, structured approach — namely continuous audit.
Read on for more about what continuous audit is, the many benefits for public sector audit teams, and why automation, analytics and AI are natural next steps for getting started.
Public sector audit leaders agree: Cyclical audits and traditional, manual approaches are no longer enough for the complexities and demands of today’s government agencies and higher education institutions.
“A control failure that sits undetected for six months is materially worse than one caught in week two,” says Katja Freeman, a director at Diligent and a former audit director with the City and County of Denver.
“Fraud occurs in the noise generally underneath the materiality threshold that doesn't get tested,” says Diligent Director Jason Venner, and former deputy assistant inspector general for audit on the OIG team at Amtrak.
By bringing fragmented, manual, ad hoc and periodic oversight activities together into one always-on solution, continuous audit helps public sector organizations move from periodic, retrospective assurance to timely, risk-informed oversight.
A unified platform brings risks, controls, tests and issues together. Continuous testing, with real-time dashboards, provides 100% visibility into issues and anomalies and control performance. Throughout, end-to-end workflows and standardized processes keep investigations and remediation efforts moving, from assessment and planning to fieldwork, issues and follow-up.
For federal audit and financial leaders, continuous audit supports compliance. Updates to OMB Circular A-123 mandate internal controls that are “continuous, embedded, and distributed throughout organization,” with an overall approach that helps address risks proactively and may be preventative or encourage opportunity-taking when successful.” As agencies enable continuous controls, audit teams can assess the effectiveness of these controls throughout the entire audit cycle.
For federal, state and local agencies, the value-add is in risk management. Red flags for service gaps, or benefits going out to the wrong people, can be lurking between audit cycles, potentially putting millions of dollars at risk of fraud, waste or abuse. Continuous audit delivers the always-on oversight needed for effective financial stewardship, and enduring public trust.
Finally, continuous audit is a must for public universities and colleges facing similar scrutiny in areas like research grants and student aid. When funders or oversight bodies ask for a status update, on how funds were controlled, where exceptions occurred, how issues were remediated, etc., leaders are prepared with answers.
Continuous monitoring by control owners keeps them audit-ready day to day, and continuous auditing gives leadership and external funders independent corroboration that the monitoring itself is trustworthy.
So, how can public sector audit teams move their audit operations from period to continuous, even with limited staff and resources?
Three words: Automation, analytics and AI.
In the important area of internal controls, automation and analytics make it possible to monitor full populations of transactions, not just samples, and feed exceptions directly into workflows for investigations and remediations.
Audit teams can configure key controls to surface exceptions in near real time and use repeatable analytics to bring consistency and efficiency to high-volume, high-priority areas like duplicate payments, ineligible beneficiaries and suspicious vendors.
For routing exceptions and tracking remediation efforts, AI-powered solutions can automatically create issues when anomalies are detected or tests fail. Ideally, these issues are automatically assigned to control owners or program managers, along with root causes, corrective actions, due dates and steps for validation.
Finally, an automation- and analytics-powered audit solution helps public sector teams streamline reporting and stay audit-ready. Automatically generating evidence packages and audit trails keep leadership teams consistent and prepared, as do always-on dashboards on control health, open issues and the status of remediation efforts across departments and programs.
Finally, an automation- and analytics-powered audit solution helps public sector teams streamline reporting and stay audit-ready. Automatically generating evidence packages and audit trails helps make the life of first and second line auditors easier and keeps leadership teams consistent and prepared. Always-on dashboards on control health, open issues and the status of remediation efforts across departments and programs, is another area where technology can really make a difference.
Sharpen your picture of risk, 24/7, with Diligent’s AI- and analytics-powered audit solutions. Schedule a demo today.
