About 15 of HCA's continuous audit routines look directly for irregularities traceable to the finance operation. Journal entries by senior finance executives or business-unit leaders are flagged, because entries normally are made by lower-level accountants. Likewise, any entries that boost revenue by a certain percentage, particularly those that put the business unit just above its budgeted monthly goal, are flagged. "It might be valid, but at least an auditor should take a look to make sure somebody didn't just pad something to make budget," says Whitaker.
Other journal entries that are watched in the continuous audit telescope are adjusted estimates for contingencies like malpractice-insurance claims, bad debt allowances, and amortization schedules for intangible assets. Again, the goal is to identify instances of invalid earnings management. "If somebody puts something on the balance sheet as an asset that previously was in expenses, we want to know why," asserts Whitaker. "Someone could do a journal entry just to shave some expenses for the month, thinking that the next month they'll just reverse it and no one will be the wiser."
Reader CommentsDisplaying 3 of 3
JACKIE ENGEL
Oct 21, 2009 4:01 PM ET
Continuous Audits are a best practice in Telecom Expense Management
An excellent example of a high ROI from continous audits is in telecom expense management (TEM). Telecom invoices are … more
Marcelle Green
Sep 22, 2009 3:21 PM ET
Take some time
Hoffman had it right in my opinion. The Sarbox does eat a lot of time a resources, but as he has done, take the time to … more
Wael Bibi
Sep 19, 2009 10:27 AM ET
Good Article
Good Article.Hope to hear more from internal auditors who are trying to implement continuous auditing .I just think of … more
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