Does your business need to conduct an audit or ongoing review? Both activities, if not understood fully, seem to suggest the same meaning and results. Both refer to activities that offer assurance that something is accounted for properly. When we use these terms in business operations, auditing and monitoring refer to the necessary assurance that a business’s accounting is accurate and reliable based on tests, analysis, and data gathered.
However, auditing and monitoring are two completely different activities that have their own particular meanings. If used improperly, these terms may lead to inaccurate assumptions, goals, and results. The distinction between the two terms is important because it can create confusion among employees, management, and board members when they are used interchangeably.
1. Auditing vs. Monitoring
The term “audit” is used for engagements that offer a high level of assurance. It means that the auditor has gathered strong and convincing data that a subject matter meets a particular criterion.
On the other hand, “monitoring” is not necessarily an assurance of something, and instead is the ongoing activity that points out flaws and non-compliance.
2. Who conducts these activities?
Audits are conducted periodically by individuals independent of the activity or process in question. While monitoring involves ongoing activities directed by management and conducted by those who may or may not be part of the process, they are there to ensure that processes are working as intended.
3. Characteristics of Auditing and Monitoring
4. Where do auditing and monitoring intersect?
Auditing and monitoring often benefit from each other. Monitoring results can provide auditors with a picture of what are the most risky or problematic business areas which need to be kept in focus.
Audit tests can also validate monitoring results. Auditors can review monitoring methods to ensure that the correct and consistent approach for reporting findings is in place properly.
4. What are the benefits of auditing and monitoring?
Overall, both auditing and monitoring are important processes for any organization. Consistently performing these actions adds value through improved compliance, awareness, and communication, therefore increasing the ability of the organization to achieve its goals. Monitoring and auditing activities should not be viewed as short-term projects, but rather as a commitment to maintain a systematic approach when conducting business.
At CS Accounting, we understand the necessity of auditing and monitoring business finances. We take pride in simplifying these important procedures for our clients. We encourage you to contact us with questions or concerns regarding this or any financial subject.