What is Continuous Auditing?

Many security and compliance professionals hear the term “continuous monitoring” as part of their information security process, and have a good grasp of the term’s meaning – but “continuous auditing” may feel redundant or confusing.

That’s unfortunate. Understanding how continuous auditing fits into a security-first approach to cybersecurity helps both to protect the integrity of your data and to prove the strength of your controls work. This post will explain what continuous auditing is and how you can put it to good use.

What Is Continuous Monitoring?

Continuous monitoring is the real-time capability to identify threats against your IT systems. By incorporating machine learning tools, you can assure that your internal controls remain effective while predicting potential threats and intercepting them before they strike.

Why is that necessary? Because malicious actors update their tactics constantly to find new vulnerabilities. These “zero-day” threats (that is, vulnerabilities previously unknown to you) pose a significant, ongoing risk to your data environment. You need constant vigilance to find them.

What Is Continuous Auditing?

Continuous auditing means that your internal auditors and external auditors use automated systems to collect documentation and indicators about your information systems, processes, transactions, and controls, ideally on a continuous basis.

Using these tools, your auditors can collect information from processes, transactions, and accounts in a more timely, less costly manner allowing you to move away from point-in-time reviews.

How Do Continuous Monitoring and Continuous Auditing Differ?

Although continuous monitoring and continuous auditing both use automated tools to gather real-time data, they provide different insights to different audiences.

Continuous monitoring lets management respond to threats that affect its operations and business processes. For example, an automated tool may provide alerts about new zero-day exploits that require a software update to maintain the effectiveness of controls.

Continuous auditing allows auditors to gather the log information needed to support compliance conclusions. Instead of sampling a percentage of transactions and processes, the internal auditor can review all of them.

Although continuous monitoring and continuous auditing complement each other, they collect different data. Continuous monitoring tools collect information about the effectiveness of your controls against malicious actors. Continuous audit collects documentation proving that you responded the way a standard or regulation requires.

For example, if your IT security policy states that you respond to alerts within 72 hours, then your continuous monitoring tools provide you with information showing where a control has failed. Receiving an alert, however, does not necessarily mean you responded to it in a timely manner. Continuous auditing tools allow you to document your IT department’s response to the alert.

What Is the Purpose of Continuous Auditing?

Continuous auditing is an effective strategy to spread the audit workload throughout the year.

It involves regular assessments of accounting methodologies and risk controls, helping to prevent the breakdown of controls during the year – breakdowns that otherwise might go undetected until the annual audit. This also makes it easier to track the effectiveness of procedures and monitor for cyberattacks and other unusual or non-compliant activity.

Considerations When Implementing Continuous Auditing

The following are the main considerations to keep in mind when implementing continuous auditing:

• Involve your auditor early to ensure their buy-in and to benefit from their expertise in the audit process.
• Identify controls that can be easily measured in a continuous audit approach, and work with your auditor to determine the frequency and process for collecting audit evidence.
• Leverage technology tools to support the continuous audit process and reduce the burden of evidence collection.
• Start with a narrow focus and develop it over time, to ease the transition to a continuous audit approach.

Why Is Continuous Auditing Better Than Traditional Audit Procedures?

Traditional audits focus on a single point in time. The auditor requests information during a certain period, and you provide the documentation.

IT security audits, however, require greater insights into how organizations manage the threats facing systems and networks. Continuous auditing proves that you know your environment and can identify non-compliance immediately.

Financial institutions are an excellent example of how traditional audits and continuous auditing can both be vital tools for risk management and compliance.

First, the Truth-in-Lending Act requires a financial institution to provide disclosures about the terms and costs associated with consumer loans. If a firm maintains a record proving that the notices were provided at the required time, then that firm does not need to monitor the activity continuously.

On the other hand, cybersecurity regulators such as those from the New York Department of Financial Services (NY DFS) require firms to monitor their IT environments continuously, to assure that financial statements reflect a cybersecurity event’s impact. To maintain that compliance, continuous auditing tools can be used to prove that not only did you respond to the threat, but that you made the appropriate notifications afterward.

How Do Continuous Monitoring and Continuous Auditing Support a Security-First Compliance Program?

A security-first compliance program means not just establishing controls to protect data, but then continuously protecting that information from new threats. If you continuously monitor attempted intrusions to your systems and data, your security-first stance allows you to meet updated compliance requirements rapidly.

Modern regulations and standards increasingly require management to oversee your IT security procedures. A continuous monitoring tool provides management the visibility into emerging threats that will allow them to make decisions based on their risk assessment.

Once you respond, you need to update your control and risk assessments and prove you complied with standards and regulations. Your continuous auditing tool allows your internal auditor to review your security controls for compliance alignment.

Essentially, you need a piece of technology that connects the continuous monitoring of a security-first approach to the documentation demands of whatever compliance obligations you have. This is where the two tools overlap.

Continuous Auditing Tools

You can use various tools to implement and optimize your audit plan. These include:

• Data analytics software to analyze large volumes of data and identify potential risks, anomalies, and patterns. You can use these tools to automate audit procedures and uncover insights into your organization’s critical controls.
• Risk assessment tools to assess your organization’s overall risk exposure and accordingly prioritize audit activities. You can use them to identify potential risks and focus your audit efforts on addressing areas that pose the greatest risks.
• Process mining tools to analyze business processes and identify bottlenecks and efficiencies that negatively impact business performance and safety. You can use them to identify potential improvement areas and optimize processes to ensure the highest possible efficiency.
• Continuous controls monitoring tools to monitor key systems and processes in real-time, which identifies potential anomalies and issues as they arise. With these tools, your teams can identify and respond to emerging risks and assure key controls continue functioning as intended.
• Robotic process automation (RPA) tools for automating manual processes and repetitive tasks. You can use these tools to ensure more efficient use of audit resources and free up your staff’s time when conducting internal audits, allowing them to focus on more complex activities.

Steps to Develop Continuous Auditing

Let’s review the three basic steps to help you implement continuous auditing successfully.

Step 1: Establish your baseline controls and objectives

Auditors use your organization’s internal controls and objectives as a baseline, against which they compare their findings. Make sure these controls are the same as the ones used for your organization’s annual audits and include policies and procedures that improve efficient operations, protect assets, and provide accurate financial reporting information.

At the same time, keep your policies and procedures flexible and be open to changes in case of shifts in data and behavior. Use the results of your continuous orders to drive policy changes for your internal team going forward.

Step 2: Identify high-risk areas

High-risk areas include critical business processes cross-referenced with your organization’s highest risks, as outlined by the leadership and enterprise risk management programs.

Be sure to assess the structure and availability of the available data, along with the projected benefits of incorporating business cycles in your organization’s continuous auditing. It’s also recommended to conduct informed evaluations based on risks.

Step 3: Decide your continuous auditing frequency

When determining the frequency of continuous auditing, you have to consider certain factors such as cost, benefit, risk, and the flow of the audited processes. Generally, quarterly audits are enough to detect unknown trends. Still, if you want to check the activeness of a specific account in practice or detect fraud issues, you can conduct audits on a more frequent basis.

How The ROAR Platform Helps With Continuous Auditing

The RiskOptics ROAR Platform‘s system-of-record makes continuous auditing and reporting easy.

By streamlining the workflow, organizations can eliminate emails while tracing outstanding tasks. Additionally, the unified control management feature allows organizations to map controls across multiple frameworks, standards, and regulations to determine whether compliance gaps exist. This mapping capability allows organizations to assure consistency and to optimize their audit management system.

For example, as part of the system-of-record dashboard, organizations have at-a-glance insight into the percentage of controls finalized and a portion of controls mapped to a particular framework.

The ROAR Platform’s streamlined workflow shows task managers the date a vendor provided a response and a status. These details mean that compliance managers no longer need to spend time following up with the organization’s multitudinous vendors.

GRC automation allows organizations to focus on the fundamental compliance issues while eliminating the tedious tasks that often make compliance feel like a burden. Not only does this help compliance officers feel more effective at their jobs, it also makes organizations more efficient at the ongoing task of governance and continuous monitoring.

For more information about how our ROAR Platform can streamline your GRC process, contact us for a demo today.