What is a common audit technique used for continuous monitoring?

Exception reporting is a common audit technique used for continuous monitoring because it focuses on identifying unusual or unexpected transactions that deviate from established norms or standards. This method allows auditors to quickly pinpoint areas that may require further investigation or scrutiny. By implementing exception reporting, organizations can continuously track performance and compliance with regulations and policies, efficiently flagging exceptions that might indicate potential errors, fraud, or irregularities.

The value of exception reporting lies in its ability to facilitate timely responses to outlier events, thereby enhancing the overall control environment and risk management processes within the organization. It supports swift decision-making based on real-time data analysis, which is essential for effective continuous monitoring. This proactive approach keeps the audit function dynamic and responsive, as opposed to relying solely on periodic reviews or historical analyses.

Other techniques such as risk assessment, sample testing, and control testing play critical roles in the audit process but are less suited for continuous monitoring. Risk assessment focuses on identifying and evaluating risks rather than monitoring transactions. Sample testing is generally employed to evaluate the effectiveness of controls by examining a subset of transactions rather than ongoing transactions. Control testing verifies the performance of controls at a specific point in time, which does not inherently provide continuous oversight.