Auditing Organizations through s Strategic Systems Lens

Auditing Organizations through s Strategic Systems Lens -...

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Auditing Organizations Through a Strategic-Systems Lens The KPMG Business Measurement Process Timothy B. Bell Frank O. Marrs KPMG LLP Ira Solomon Howard Thomas University of Illinois at Urbana-Champaign Foreword by William R. Kinney, Jr. Copyright 1997 by KPMG LLP, the U.S. member firm of KPMG International, a Swiss association. All rights reserved. This monograph is not intended to constitute an exhaustive coverage of all of the policies and procedures comprising KPMG’s full audit process, and how it comports with generally accepted auditing standards.
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Contents Foreword v Preface ix 1 Introduction 1 2 Current Authoritative Guidance 5 About the Need to Understand the Client’s Business and Industry 3 Overview of the Evolution 9 of Auditing Practices 4 Assessing Audit Risk Through a 14 Strategic-Systems Lens 5 The Global Business Environment 25 6 A Proposed Knowledge Acquisition 31 Framework for the Risk-Based Strategic-Systems Audit 7 The KPMG Business Measurement Process 33 8 Business Models, KPIs, 63 Expectations, and Audit Evidence 9 Concluding Comments 71 Appendix 73 References 81 About the Authors 85
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v Foreword by William R. Kinney, Jr. As the twentieth century comes to a close, information technology has brought dramatic changes to business processes, to business organization, and even to auditing. These changes require major reconsideration of what we know about financial-statement audit technology. This monograph presents the thinking of two leading practitioners and two leading schol- ars on the foundations of auditing technology for the twenty-first century. With changes in information technology, the inherent reliability of informa- tion systems for routine transactions processing is substantially increased, controls over transactions are increasingly embedded in software, and extensive data on nonfinancial dimensions of business performance are economical for audit use. But because information technology and deregu- lation have lowered barriers to entry in many industries, a company can lose viability quickly, making financial statements less reliable predictors of the future. Therefore, analysis of business viability is an important determinant of the value of audited financial statements. This monograph makes it clear that business viability and profitability assessments are essential elements of financial-statement auditing today and for the twenty-first century. The authors also make it clear that the viability of the whole of a business is more than the sum of its parts. The individual financial-statement elements can be valid, yet the entity as a whole not be viable because of the complex interdependencies comprising business via- bility. The monograph focuses on analyses of strategy, business processes to achieve strategy, key indicators necessary to monitor performance of busi- ness processes in achieving strategy, and risks faced by an entity.
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