Continuous Audit

What is Continuous Audit?

Continuous Audit refers to an ongoing process wherein the team of the auditor is constantly involved in checking the client’s account books throughout the year. Or it is when the team of the auditor, visits the auditee’s organization at frequent intervals usually every week, during the financial year.

It enables the internal audit to collect all the information from the process, which helps in the auditing.


  • Obtaining data: It obtains data from different processes, transactions, and accounts that assist in internal and external audit purposes.
  • Compliance: Attaining timely and cost-effective compliance with the policies, procedures, and regulations.
  • Warning system: It serves as an early warning system, to identify and control frauds, in a timely manner.


Continuous audit applies when:

  1. Its intent is to present the accounts immediately after the completion of the financial year.
  2. The volume of transactions is comparatively large.
  3. Presentation of periodical statements is necessary.
  4. Ineffective internal control system.

Why Continuous Audit is preferred?

  • It facilitates solid control over the company’s accounts. This is because the auditor is able to check the causes of any errors at the early stages, during the process of continuous audit.
  • When an auditor’s staff frequently visits the auditor’s organization, it discourages a person from committing fraud.
  • It motivates the client’s staff of the accounting department to keep the account books in an up-to-date manner.
  • When the auditor is in constant touch with the accounts and state of affairs, it provides an opportunity to get a complete knowledge of the client’s business. This ensures the efficient discharge of duties.

Advantages of Continuous Audit

  1. Easy and prompt error detection: In this audit, the auditor checks and examines the just after the transaction is complete, so it is relatively easier to discover frauds and errors in a prompt manner.
  2. Employees’ morale check: It provides a morale check on the employees when the auditor visits the organization at frequent intervals.
  3. Preparation of interim accounts: It assists in the preparation of interim accounts, that assist in the declaration of interim dividends by the company’s board.
  4. Quick Presentation of Accounts: Because audit takes place on a continuous basis, presentation of the audited accounts is possible just after the end of the financial year.

Disadvantages of Continuous Audit

  1. Performance of the audit takes place in installments. Therefore, the team may fail to keep proper track of those items which are not yet checked. Resultantly few transactions may escape the audit scrutiny.
  2. After the checking of the accounts by the auditor staff manipulation by the client’s staff is possible. Therefore, it requires appropriate safeguards and action.
  3. It is uneconomic when the size of the enterprise is small. Because it takes a lot of time and effort to prepare for an audit. Also to fulfill the needs of the auditee.
  4. Frequent visits of the audit staff may disturb the daily work, which results in an unhealthy relationship between the audit and client staff.

How to Overcome Drawbacks of Continuous Audit?

The different ways to overcome drawbacks of the continuous audit are:

  • To overcome the disadvantages of the continuous audit, the auditor must keep a record in the audit notebook:
    • All the work performed by him and his team member at various intervals of time
    • Errors identified and rectified
    • Queries raised
    • Explanation of the auditee in respect to the queries raised.
  • The auditor should ensure that the team undertaking the audit remains the same. This will help in maintaining the consistency of work. Also, it will make certain the follow-up of the points that remain unresolved.
  • Checking off every single part of work, as and when it is carried out, should be finished in one visit. Also, no work should remain incomplete. This is to avoid chaos and confusion.

Wrap Up

Continuous Audit encompasses a complete examination of the client’s books of accounts at frequent intervals.

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