Point out the merits and demerits of continuous audit.
Advantages of Continuous Audit Continuous audit is useful in :
Early detection of frauds and errors : Detailed and exhaustive checking of accounts leads to quick detection of frauds and errors.
Knowledge of technical details: Continuous audit helps the auditor to understand the technicalities of business. Hence, he can advance valuable suggestions to his client for improving the system of maintaining accounts and other internal controls.
Efficiency of auditors : In case of continuous audit, can plan his audit work in audit, the auditor can plan his audit Work in a systematic manner. The, auditor’s work is more evenly spread over the year.
Moral Check : As the auditor visits the organisation regularly or frequently, it acts as a moral check on the staff of the client.
Efficiency of Auditor: Auditor, in case of a continuous a systematic manner and can evenly spread over the year.
Accurate Accounts: Regular visit of the auditor makes the company staff alert to maintain the accounts upto date and accurate.
Disadvantages of Continuous Audit: The demerits of Continuous audit are:
Tampering with figures : Figures may be altered (unknowingly or fraudulently) after being checked.
Likely collusion between client’s staff and auditor’s staff : Frequent interaction of the staff of the client with that of the auditor may provide scope for unhealthy relationship between the two. They might collide to perpetuate a fraud.
Losing link in audit work: The auditor’s staff may not be able to, Despite caution, follow up transactions and certain queries maybe left answered.
Dislocation of client’s work: Frequent visits of the auditor disrupts the normal flow of work. The staff of the client may divert its attention from their routine work to providing details required by the auditor.
Expensive : The continuous audit involves detailed and exhaustive checking. The auditors, therefore, charge hefty audit fees.
Thus, in the light of advantages and disadvantages, it can easily be said that continuous audit is a double edged word