How achievable is continuous audit?

Continuous audit, sometimes referred to as continuous monitoring, is a phrase often thrown into the conversation when we talk about innovation in audit. In reality, however, there is a general lack of understanding of continuous audit’s full potential and how it can be implemented.

At a fundamental level, continuous audit offers the ability to observe data in real time. For many in the auditing industry, it is seen as a game changer in financial reporting as it helps to smooth out stressful annual, bi-annual or quarterly reporting deadline periods. But what other benefits does continuous audit offer, who benefits most and what are the challenges? Importantly, is continuous audit even achievable? 

One reason continuous audit has yet to reach its full potential is that such questions are often considered in isolation. However, to really determine whether continuous audit is the future, we need to take a more holistic approach that considers its impact on all the moving parts involved in preparing financial statements. 

Removing the pressure on preparers  

Traditional accounting procedures rely on gathering data at specific points of the year using the same financial statement closing process. The approach often causes bottlenecks when data is not readily available or known. This results in an uneven flow of information which creates pressure on the ability of preparers to meet reporting deadlines. In contrast, continuous audit that monitors data in real-time removes this pressure as most data will be readily available and easily accessible. This gives more time to gather new data that may be required or not yet in the system. It also leaves more time for preparers to identify and deal with any accounting anomalies that may impact reporting accuracy.  

Greater transparency and control 

As well as smoothing out the data gathering process, continuous audit offers the ability to give a visual of the financial statement at any point in time to senior management and board members. Having a constant view of what the financials look like gives the Chief Executive Officer (CEO) and Chief Financial Officer (CFO) more transparency to compare and contrast changes in financials on a daily, weekly or monthly basis. This not only gives a better overview of financial performance, but also gives the agility needed to inform strategic business decisions more accurately and resiliently. 

The impact on auditors 

The benefits of continuous audit enjoyed by preparers are likely to improve auditing services overall. Taking away the pressure of meeting reporting deadlines and spreading the data flow across the reporting year allows auditors to focus on the accuracy and quality of financial statements received. In addition, improving the data pipeline process also results in fewer interventions at critical reporting phases, giving auditors more time to focus on adding value to services supplied.  

Recognising the challenges 

Technology and artificial intelligence (AI) are integral to the continuous audit function. Using the right technology allows the process to remove standard and repetitive data-gathering functions. The right software is also vital for dashboards that give management real-time financial visibility. However, implementing a continuous audit approach does come with various challenges. Data security is the biggest challenge, particularly when there is greater online access to sensitive financial information. In addition, AI is still at an early phase of development and is only as good as the data it can learn from. How much access to data should AI have, and who do you share that information with? These are all questions that need to be resolved. The introduction of new technology also heralds cultural change for some business functions. It’s essential that this is considered before implementation to minimise staff disruption and allow necessary training and redeployment initiatives to take place.  

Dream or reality? 

There is little doubt that continuous audit makes sense for both preparers and auditors. It not only removes the pressure from critical reporting periods but allows everyone involved to focus on the more dynamic aspects of their role. By implementing a continuous audit approach, businesses can add value to the bottom line through greater visibility, and auditors can focus on the quality of service provided. Whether continuous audit becomes a reality depends on access to dynamic software solutions now required and a robust implementation strategy.