WHAT IS A CONTINUOUS AUDIT?

- Audit that remains continue throughout the financial year is known as the continuous audit.
- The auditor checks each and every transaction. The large scale business organisations require constant check of their business matters, as there may be declaration of dividend, during the year.
- In case of a company, where the volume of transactions is quite large, the management can follow the policy of applying continuous audit.
- If the internal control systems prevalent in the organisations are not satisfactory, then to apply continuous audit will be the best option in order to represent a true and fair view of the organisation.
R.G. Williams says that continuous audit is one where the auditor or his staff is consistently engaged in checking the accounts during the whole period, or where the auditor or his staff, attend at regular or irregular intervals during the period.

Advantages:
- Thorough check: The primary advantage of the continuous audit is thorough checking. The audit staff remains busy throughout the year, as each and every transaction is reviewed in detail.
- Quick detection of errors: As the auditor checks the transactions, in detail, at regular intervals there is quick detection of errors.
- Timely presentation of accounts: As most of the checking work is already performed during the year, the final audit can be presented on a timely basis to the shareholders, after the close of the financial year at the annual general meeting.
- Prompt filing of returns: The continuous audit proves beneficial for the quick filing of returns as the accounts are prepared as well as audited at the end of the year.
- Interim dividend: The continuous audit proves to be helpful for the declaration of the interim dividend.
- Moral check on the client’s staff: The continuous audit is useful to develop moral check on employees. As the time between recording and checking is quite short, the staff cannot think to plan any frauds. The auditor at times may surprisingly visit the client’s office, therefore, it will have a considerable moral check.
- Convenient for auditor: The continuous audit is helpful for the audit staff for distribution of work, for the whole year. The audit staff can prepare the programme on the basis of time allocated. The auditor gets sufficient time for important and suspicious matters to draw conclusion.

Disadvantages:
- Small entity: The continuous audit is not fit for small scale business organisations since it has fewer transactions.
- Expensive: It is not suitable for small business organisations with less financial transactions, as the continuous audit is an expensive system of audit.
- Alterations of figures: Figures in the books of accounts which have already been checked by the auditor, may be altered by a dishonest employee and frauds may be committed.
- Disturbance at work: The frequent visits by the auditor may disturb the work of the client. When the audit work starts, the work of accounting staff suffers, as the books are not spare.


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