In the majority of companies all over the world, audit takes place yearly but there are many companies which conduct an audit at regular intervals and this act of company conducting the audit at regular intervals is called continuous audit. A continuous audit is usually done or preferred by those companies which are big and have plenty of transactions in a month so that errors and frauds can be checked and rectified continuously, in order to understand more about this type of auditing one should look at advantages and disadvantages of continuous audit –
Advantages of Continuous Audit
Early Detection of Errors
In case of students if school administration takes exam at the end of the year instead of taking quarterly or monthly exams than it may throw some disappointing results of some of the students because due to quarterly or monthly exams school gets chance to identify weak students and work on those students so that they get good marks in final exams in the same way in case of companies continuous audit helps the company in early detection of errors in the books of accounts and company therefore can take steps to rectify the errors before the preparation of final books of accounts.
Keep Everyone on Toes
Another benefit of this audit is that it keeps everyone on toes whether its employees or auditors or the owner of the company and when everyone is cautious than chances of errors as well as frauds reduces because everyone knows that they are being watched continuously resulting in fewer errors as well as frauds.
Early Preparation of Final Accounts
When there is continuous audit than all errors are rectified on a continuous basis which in turn makes it easy for the company to prepare final accounts. In simple words, a company which has continuous auditing in place is likely to prepare final accounts quicker than those companies which do not have continuous auditing in place.
Disadvantages of Continuous Audit
Expensive
The biggest disadvantage of continuous auditing is that it is expensive because auditors need to be paid round the year for their work and that is the reason why this audit is suitable for big companies as small companies may find it costly to conduct a continuous audit.
Disruption of Regular Work
Auditors do not work silently rather they keep asking queries from the workers working in the company which leads to disruption of regular work of the company. In simple words sometimes this auditing can lead to lower productivity and lower efficiency as far as working of the company is concerned.
No guarantee of Error free Accounts
Continuous audit is not a guarantee that company’s books of accounts will be error-free or there will be no frauds because sometimes errors remain even after continuous audit and hence if company is thinking that this auditing will correct all problems in books of accounts than company is wrong as it this audit does not guarantee 100 percent error-free books of accounts.
As one can see from the above that continuous audit has pros as well as cons and that is the reason why any company thinking of having this system of auditing should carefully read above points and then take the decision whether to go for this type of auditing or not.