The auditor and the client both profit after switching to an electronic audit system. The auditor requires
less staff, time, and other resources to perform his tasks, while the client pays for fewer billable hours.
The cost of the service is minimal and often billed to the client as an out-of-pocket cost of the audit. The
savings can then be used to perform other tasks, as needed.
The electronic audit process not only offers obvious advantages for both internal and external auditors, it
also assists regulatory agencies in the performance of their tasks. For example, in 2012 a special
committee of the NFA made up of representatives from the futures industry’s regulatory agencies
implemented the following provisions to protect investors and reduce the risk of future frauds following
MF Global’s $1.6 billion scandal in October, 2011 (see Duffy 2012):
“1. Requiring all Futures Commission Merchants (FCMs) to file daily segregation reports
[demonstrating the mandatory segregation of customer funds held by FCMs].
2. Requiring all FCMs to file bi-monthly Segregation Investment Detail Reports (SIDR),
reflecting how customer segregated funds are invested and where these funds are held.
3. Performing more frequent periodic spot checks to monitor FCM compliance with segregation
requirements since... December [2011].”
The committee uses Fox’s Confirmation.com software to obtain FCM account statements and balances
from third parties (banks and depositories), support the performance of regulatory audits, verify SIDRs,
and review daily FCM segregation reports for accuracy. None of this would have been practical using
traditional, paper-based audit processes. And according to a conversation between the lead author of this
article and Brian Fox, Confirmation.com is being updated with additional tools to help regulators prevent
future abuses of the system.