Continuous audit implies a detailed examination of all the transactions by auditor continuously throughout the year. In other words, when the accounts of the client are checked continuously throughout the whole year or at intervals during the financial period is called as Continuous Audit. At the end of the financial period, the auditor checks the correctness of the financial statements and submits a report without much loss of time.
1. It involves detailed examination of all transactions by the auditor.
2. The auditor visits the business concern at frequent intervals, say, weekly or fortnightly or monthly during the period of audit.
3. Continuous audit is done simultaneously with the preparation of accounts.
4. The auditor is constantly engaged in checking the accuracy of the accounts during the whole accounting period.
5. At the end of the financial period, the auditor checks the correctness of the financial statements and submits a report.
1. Easy Detection of Errors and Frauds: The detailed checking involved in continuous Audit can discover errors and frauds easily and quickly.
2. Quick Presentation of Accounts: Since the accounts are checked throughout the year, it is possible to present the audited accounts to the shareholders soon after the close of the financial year.
3. Proper Planning: The regular visits performed by the auditor makes the clerk alert in maintaining day-to-day accounts. It also enables the auditor in timely completion of the audit work.
4. Moral Check on the Employees: As the auditor pays surprise visits to the business in continuous audit, it has a considerable moral check on the clerks as they are not aware when the auditor comes.
5. Detailed Examination: As the auditor visits his clients at regular intervals throughout the year, a detailed and exhaustive checking of accounts is possible.
6. Preparation of Interim Accounts: Continuous audit helps in quick preparation of interim accounts and helps the board of directors to declare interim dividend.
7. Valuable Suggestions: Regular visit of an auditor helps the auditor to understand the technical issues of business. This enables the auditor to make suggestions for the improvement of business.
1. Possibility of Alteration: Records and figures in the books of accounts which have already been checked by the auditor may be altered after the audit is over.
2. Dislocation of Client’s Work: The frequent visit made by the auditor may dislocate the work of his client and cause inconvenience to them.
3. No Continuity in Work: In continuous audit, the auditor conducts audit work at intervals. Hence he loses continuity and fails to seek clarifications of the queries arising in the previous visit.
4. Creation of Unhealthy Relationship: The frequent visits of the auditor may establish unhealthy relationship between him and the clerks.
5. Expensive: It is a very expensive form of audit.