The Power of Continuous Auditing and Monitoring

Key Takeaways

• Real-Time Oversight: Continuous auditing (by auditors) and monitoring (by management) offer real-time insights to catch issues early.
• Improved Controls & Compliance: Daily automation strengthens internal controls and ensures ongoing compliance with frameworks like SOX and HIPAA.
• Greater Efficiency: Automated tools boost audit coverage, accuracy, and allow teams to focus on high-risk areas.
• Data-Driven Decisions: Real-time data helps management and auditors make smarter, proactive decisions.
• Start Small, Scale Smart: Begin with high-risk areas (e.g., user access) to build momentum. The long-term value outweighs the initial effort.

In today’s fast-paced business environment, it is unwise and insufficient to wait until year-end to assess internal controls and catch errors. Traditional audit cycles – while still incredibly valuable – can still leave organizations exposed to risks, delayed insights, and preventable compliance issues. This is where continuous auditing and monitoring can add value.

What Is Continuous Auditing and Monitoring?

Continuous auditing is the automatic and frequent evaluation of controls, processes, and transactions by the (internal) audit function. At the same time, continuous monitoring is typically performed by management to ensure processes are operating as intended and that risks are managed as they arise.

While continuous auditing and continuous monitoring are different activities, both approaches share common goals, including providing ongoing assurance that internal controls are operating effectively, risks are being addressed proactively, and compliance is being maintained – all, essentially, in real-time.

Benefits of Continuous Auditing and Monitoring

1. Real-Time Risk Detection
   • Continuous auditing allows internal auditors to flag exceptions, anomalies, or control failures as they happen, rather than finding issues weeks or months after they occur.
   • For example, detecting unusual vendor payments or inappropriate user access privileges immediately is more beneficial than discovering an issue during the next annual audit cycle.
2. Stronger Internal Controls
   • Integrating automated controls testing into daily operations helps organizations build stronger and more resilient control environments. These continuous approaches reinforce accountability and encourage adherence to policies every day, not just during audits.
   • Ongoing visibility often leads to better control design and more consistent execution across business units.
3. Increased Audit Efficiency and Coverage
   • Incorporating automated auditing tools to perform continuous auditing and monitoring allows for the analysis of large volumes of data beyond the ability of manual reviews. This helps audit teams cover more areas and information with less resources, while focusing their time and effort on higher-risk areas with greater potential impacts.
   • These automated auditing tools can also help improve sampling accuracy and audit objectivity.
4. Enhanced Compliance Monitoring
   • Continuous monitoring helps ensure that regulatory requirements and organizational policies are met consistently. For organizations that are subject to specific frameworks, such as SOX or HIPAA, continuous monitoring provides helpful documentation and an audit trail for regulators to easily follow.
   • This results in a reduction in the risk of compliance violations and can help smooth the process required for external audits.
5. Data-Driven Decision Making
   • Continuous auditing creates real-time information that can help auditors and management make better-informed, evidence-based decisions. This approach shifts the role of audit from reactive testing and checking of controls to strategic advisory.
   • For example, being able to identify trends in operational inefficiencies before they get out of hand can be invaluable.

Overcoming Challenges to Implementation

Continuous auditing and monitoring require investment in the correct technology, integration of already existing and new data sources, and a new mindset of real-time assurance, as opposed to periodic assurance. It is not a simple implementation; however, the long-term benefits outweigh the initial effort.

A simple way to begin the implementation of continuous auditing and monitoring is to start small. Beginning the implementation process with one higher-risk area, such as procure to pay or user access, can help build a foundation and provide invaluable experience for future implementation.

The Future Is Continuous

The expectation of internal auditing is evolving, as the goal is no longer just to evaluate the past but to help safeguard the present and influence the future of the organization. Continuous auditing and monitoring aids internal auditors as expectations grow. Enhancing agility and improving risk awareness increases the value that internal auditors deliver throughout the organization.

Relying on annual audit cycles is no longer sufficient. With the correct combination of strategy and tools in internal audit, continuous auditing is not just possible, it is powerful.

To learn more about McKonly & Asbury’s Internal Audit services, contact Dave Hammarberg, Partner, or Victor Kong, Senior Manager, who have been providing internal audit services for over twenty years. We would love to discuss how we can assist you with your challenges.

About the Author