CONTINUOUS AUDIT :-The audit which remains continue throughout the financial year is called continuous audit.
In this case the auditor visits at regular or irregular intervals during the financial year. He checks each and every transaction. At the end of the year he checks the balance sheet and profit and loss account. This audit is very costly but minimizes the errors.
ADVANTAGES OF CONTINUOUS AUDIT
1. Early Location Of Errors :-
It is the main advantage of continuous audit that errors are located at the early stage. Because the books are checked son after the entries are made.
2. Check On Frauds :-
Continuous check is very effective in controlling the frauds because books are examined after certain regular or irregular intervals.
3. Quick Rectification :-
Due to continuous audit errors are located easily and rectified at an early stage.
4. Special Attention :-
Before the finalization of accounts an auditor has a sufficient time to pay proper attention to the checking of account and detection of frauds and errors.
5. Guidance To Client :-
The auditor remains in touch with the business details, so he also indicates about the mistakes and gives valuable suggestions to the client to keep the accounts in proper manner.
6. Useful For Interim Dividend :-
Continuous audit is also very useful in preparing the interim audit, without any delay. At any time if directors of the company are willing to pay the interim dividend to the shareholders they can do so.
7. Upto Date Accounts :-
Accounts of the business are kept upto date by the staff because they know that auditor may visit and check the accounts at any time.
8. Chance f Over Looking Reduces :-
Auditor has a close contact with the details of the account and he also sufficient time to check the records. So the chances of over looking are reduced in this type of audit.
9. Quick Presentation Of Accounts :-
Continuous audit is very useful because accounts are maintained regularly. So as the financial year end final audited accounts are presented before shareholders.
10. Surprise Visit :-
In this audit auditor can visit any time, so due to this fear, the staff remains always alert and chances of fraud reduces.
11. In Time Advice :-
Auditors are professional so their advice is always available for the staff. It becomes very easy in the continuous audit to seek advice from the auditor side by side.
12. Through Checking :-
In this case auditor has sufficient time to check the books of accounts thoroughly. Such type checking is not possible in other cases.
13. Saving Of Penalties :-
Sometimes non-compliance of law is located very late and businessman has to pay the fine. If continuous audit is applied then such type of irregularities can be avoided. So it is useful for saving the penalties.
14. People Trust Increases :-
Continuous audit encourages the confidence of the investor. The shareholders feel confidence and they increase the investment. So goodwill of the company also improves.
15. Useful For The Auditor :-
The auditor also faces many problems during this audit, so he studies the rules and regulations of the company and updates his knowledge side by side.
DISADVANTAGES OF CONTINUOUS AUDIT
1. Alteration Of Figures :-
Already checked figures of accounts may be alternated by the dishonest staff and frauds may committed.
2. Expensive :-
Continuous audit is more expensive as compared to other kinds of audit. Because the auditor has to devote more time to this audit.
3. Inconvenience :-
A frequent checking and frequent visits of an auditor may disturb the work of client and his staff.
4. Mechanical Work :-
The work of audit becomes too mechanical because it remains continue throughout the year.
5. Queries Problem :-
If the auditor's two visits interval is long then so many queries remain outstanding.
6. Not Fit For Small Business :-
When the business is small nature then there is no need of continuous audit for the whole year. So this audit is not fit for small business.
7. Case Of Seasonal Industries :-
In case of sugar, and textile industries continuous audit is not useful because in the off season their work reduces or closes.
8. Low Earning :-
Continuous audit is not suitable for earning point of view because audit staff remains busy all the year. They cannot complete the audit of many companies.
9. Friendship Develops :-
All the year auditor and management remains together. So their friendship may develop and auditor role may not remain impartial.
Note : No doubt there are some disadvantages in continuous audit also but these can be removed by taking some precautionary measures.
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