What is 'Continuous Audit'

Continuous audit is an internal process that examines accounting practices, risk controls, compliance, information technology systems and business procedures on an ongoing basis. Continuous audits are usually technology-driven and designed to automate error checking and data verification in real time. A continuous audit driven system generates alarm triggers that provide notice about anomalies and errors detected by the system.

BREAKING DOWN 'Continuous Audit'

An internal auditing department normally has a set schedule to do its work, whether monthly, quarterly, semi-annually or annually. An individual or team spends time in each area to gather information, review and analyze data, and publish their reports for management and the audit committee of the Board of Directors. A continuous audit is implemented via technology, and these mini logs assist the internal auditor(s) in between their regularly scheduled formal audits.

Continuous auditing is not to be confused with computer-aided auditing. In computer-aided auditing, the auditor is simply being assisted by technology, such as spreadsheets to complete a periodic audit. Computer-aided auditing is driven solely by the auditor, while continuous auditing is meant to run automatically at regular tight intervals.

Pros and Cons of a Continuous Audit

A continuous audit is beneficial in flagging unusual or non-compliant activity in multiple areas of a firm, and ensuring that established procedures are being followed. For example, in the accounts payable department, the continuous audit system could stop an unauthorized amount from being sent to a vendor. In the accounting or legal department, it can verify that a required filing to the Securities and Exchange Commission is set to be sent before a deadline. The continuous audit function can monitor whether the firm's computer networks have been prepared for potential cyber attacks. These and more tasks of the continuous audit promote efficiency in an organization and minimizes or entirely eliminates violations of procedures or processes that could expose it to monetary or legal liability. The downsides to a continuous audit are initial set-up costs and perhaps an overreliance on the system in some areas of a firm's operations, where in fact human intervention would be called for.

  1. Auditing Evidence

    Auditing evidence is information collected to review a company's ...
  2. Field Audit

    A field auditĀ is a comprehensive tax audit conducted by theĀ Internal ...
  3. Performance Audit

    A performance audit is an examination of a program, usually in ...
  4. Statutory Audit

    A Statutory Audit is a legally required review of the accuracy ...
  5. Audit Risk

    Audit risk is the risk that the financial statements are materially ...
  6. Auditability

    Auditability describes the ability to achieve accurate results ...
Related Articles
  1. Taxes

    How Does An IRS Audit Work?

    It doesn't automatically mean an IRS agent will be ringing your doorbell. Here are the different types of IRS audits and how to handle them.
  2. Taxes

    What To Do If You Get Audited

    If you're in the minority of those that get audited, find out how to prepare and how to handle the process.
  3. Insights

    IT Security Auditing

    Find out about this promising career that can match IT with business studies.
  4. Taxes

    Audit Stories You Won't Believe

    Take comfort: Even if you do get audited, you'll have an easier time that these unlucky taxpayers.
  5. Taxes

    Should You Be Worried About a Tax Audit This Year?

    Tax audits have decreased in recent years and are targeted toward high earners and business owners.
  6. Insights

    How The IRS Works: Functions & Audits

    Even the most enlightened citizen curses taxes, possibly while simultaneously acknowledging that they're the price of a civilized society.
  7. Taxes

    How to Avoid the 6 Most Common Tax Audit Triggers

    These are the most common scenarios that can trigger the IRS to audit a tax return.
  8. Taxes

    How To Appeal Your IRS Audit

    The auditor's review isn't always the last word. Many taxpayers who are audited can successfully appeal their audits and save thousands of dollars.
  9. Insights

    Internal auditor: career path and qualifications

    Find out what kind of work internal auditors do in large organizations, and learn how to get started working in the field.
  10. Personal Finance

    Accountant: Career Path & Qualifications

    Learn the different career paths a new accountant can take, and understand the educational requirements for the career, which vary based on position.
  1. Can the IRS audit you after a refund?

    Learn how the U.S. Internal Revenue Service (IRS) can conduct a tax audit even after a taxpayer was issued a tax refund in ... Read Answer >>
  2. Who enforces GAAP?

    Take a deeper look at the private enforcement mechanisms behind the generally accepted accounting principles for American ... Read Answer >>
  3. What are general and administrative expenses?

    General and administrative expenses are not directly attributable to the production of goods and services and include audit ... Read Answer >>
Trading Center