Continuous audit : A continuous audit is one in which the auditor’s staff is engaged continuously in checking the accounts of the client the whole year round or when for this purpose the staff attends at intervals, fixed or otherwise, during the currency of the financial period. Strictly speaking, when auditor’s staff attends the audit work at fixed intervals it may be strictly called interim audit. This is when an audit is conducted up to a particular date within the accounting period. The auditor may attend to audit the figures for a month or for a quarter, as the work may require. It would differ distinctly from the final audit in the extent of the work carried out; verification of assets, for example would be left until the final audit. In case of continuous audit, the work is conducted throughout the course of the financial year but is not taken to a specific accounting period, as is an interim audit. It might be that during the course of the continuous work interim figures are being audited, but the significant factor here is that the auditor will be engaged continuously on the audit throughout the financial period. Staff may be in residence throughout the period or may come and go at irregular intervals, but most of the time, the audit staff is present at the location. Thus, in case of continuous audit, the audit staff is resent as the client’s premises almost during the entire accounting period.
Advantages :
Disadvantages :
(1) Errors are discovered earlier with the result that there is adequate time for making the necessary rectification.
(2) Because of the frequent attendance of the auditor, the opportunities of committing frauds are reduced.
(3) Fraud, if perpetrated, is detected sooner with the result that size of the fraud is limited and also the chances of recovering the amount lost are improved.
(4) The attendance of the audit staff acts a moral check on the client’s staff.
(5) The client’s accounts are always kept up-to-date.
(6) Since audit can be carried on throughout the year, there is more time for detailed checking of the accounts when the audit is taken up at the close of the year.
(7) If the audit of routine transactions is completed before the close of the year, the final accounts can be prepared and reported upon much earlier.
(8) If the auditor carries on a continuous audit, he remains constantly in touch with the client’s affairs thereby able to carry out his duties efficiently.
(9) In the case of continuous audit, the work of the auditor is greatly facilitated since he is in a better position to plan out his engagements and take up the job at his convenience, avoiding the pressure at the close of the financial year when most of the business firms usually close their accounts.
(1) There is a danger that the records of transactions after they have been audited may be altered either innocently or fraudulently.
(2) The examination of an item left incomplete on a visit for being undertaking on the next visit may be overlooked.
(3) A continuous audit may involve good deal of waste of time and effort if the size of the concern is small.