Continuous audit means when the auditor visits his client in regular or irregular intervals during the financial year and checks each and every transaction and at the end of the year, he checks the profit and loss account and balance sheet.

Business Where the Continuous Audit is Applicable

  1. Where it is desired to present the accounts just after the close of the financial year, as in case of banks.
  2. Where the volume of transaction is very large.
  3. Where the statement of accounts arerequired to be presented to the management after every month or quarter.
  4. Where no satisfactory system of internal check in in operation.

Advantages of Continuous Audit

  1. Easy and quick discovery of errors.
  2. Knowledge of technical details.
  3. Quick presentation of accounts.
  4. Keeps the client’s staff regular.
  5. Moral check on the client’s staff.
  6. More time to pay and more attention on work.
  7. Preparation of interim accounts in case of interim dividend to be declared.
  8. Audit staff can be kept busy.

Disadvantages of Continuous Audit

  1. Alteration of figures can be done by accounts staff.
  2. It is inconvenient to the client because of frequent visit of the auditor.
  3. It is expensive also.
  4. Queries may remain outstanding because of long interval between two visits.
  5. The staff of clients may depend upon the auditor for some difficulties because they feel that auditor can solve the problem so why to take extra pain.

How to Avoid the Disadvantages of Continuous Audit

  1. No alteration should be allowed after the entries have been checked by the auditor.
  2. Any alteration must be rectified through journal entries only.
  3. The auditor must make a note of date of last audit in his diary and if possible he should take a note of totals of certain important accounts.
  4. Well drawn up program by the auditor will prevent any loose ends.
  5. A note should be made for the queries which are not satisfactorily answered. Auditor should try to solve these problems then and there.
  6. The auditor should tick in secret manner in respect of alteration done in audited figures.
  7. The Audit of Impersonal, general or private ledger should be conducted at the time of final audit as there is a greater possibility of fraud being committed by making fictitious entries in the nominal accounts which affect the personal accounts.
  8. Auditor should pay surprise visits so that the accounting staff of the client may not know the exact date of the visit of the auditor.

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