Continuous Monitoring vs. Continuous Auditing
Disclaimer: The contents of this article are meant to provide a general understanding of the subject matter. However, this article is not intended to provide legal or other professional advice and should not be relied on as such.
When operating a business of any kind it is vital to have a system of checks and balances to ensure efficiency. This is especially important for financial institutions, who have the added responsibility of meeting compliance standards. There are various solutions for improving efficiency and meeting compliance standards. This article will examine the benefits and differences between continuous monitoring vs. continuous auditing for financial institutions.
While you are not limited to choosing one or the other for your business, it is important to have a proper understanding of the benefits and features of both so you can make an informed decision on the internal procedures your organization is carrying out.
What is Continuous Monitoring?
Continuous monitoring, also referred to as continuous controls monitoring (CCM), is the process of analyzing internal controls for the purpose of detecting current and future risks, improving business processes, providing data to support decision making and increasing the cost-effectiveness of controls. Depending on the system or software used for continuous monitoring, it may also detect non-compliant transactions and complex fraud schemes.
Continuous Controls Monitoring Examples
While applicable to current controls being used at your organization we wanted to provide some specific examples of what CCM systems analyze to gain a better understanding of the differences between continuous monitoring vs. continuous auditing.
Our continuous controls monitoring software, for example, has the following capabilities:
- Purchase Card Monitoring: Continuously monitor purchase card (p-card) transactions for performance, liabilities, personal purchases and instances of non-compliance
- Accounts Payable Monitoring: Continuously monitor your accounts payable to enforce discounts, block payments that exceed approval limits, detect duplicate payments and invoices and prevent unwanted payments for unapproved or incomplete projects
- Payroll Monitoring: Monitor payroll controls to ensure that paycheck amounts, frequency and destinations are correct.
- Retail Monitoring: Improve your bottom line with continuous transaction monitoring, assessments of store performances, verification of discounts with policy and reduction of losses due to fraud, waste and abuse.
- P2P Monitoring: Monitor P2P solutions for false invoicing and theft of inventory.
Additional internal controls may be available for monitoring depending on the specifics of your organization however the explanation of the above-mentioned controls will allow you to better understand the differences of continuous monitoring vs. continuous auditing.
What is Continuous Auditing?
Now that you have an understanding of continuous monitoring, let us define continuous auditing so you can see the distinction between continuous monitoring vs. continuous auditing.
A continuous audit is used to document compliance activities in an organization. It provides proof for regulatory bodies that an effort is being made to be compliant with standards, and information for the organization to do so, by providing up to date metrics for adherence to security and compliance operations and procedures.
An Overview: Continuous Monitoring vs. Continuous Auditing
The main differences between these two procedures lie in their purpose. Both are used for continuous analysis of existing processes and controls, however continuous monitoring is used to alert institutions if an action occurs out of the norm, while continuous auditing is a documentation of existing actions and controls taking place in an organization.
Which Should Your Financial Institution Use?
A financial institution should be actively performing both continuous monitoring and continuous auditing. With the stringent nature of compliance regulations, and the numerous opportunities for loss and fraud that are inherent in the services offered by financial institutions, it is imperative to have the right tools.
Tier1 Financial Solutions’ compliance software, Alessa, provides your organization with the capabilities of continuous controls monitoring and continuous auditing in an easy to use software platform. Our software capabilities include AML compliance solutions, sanctions screening, fraud detection and prevention and more.
Contact us today to learn more about how Alessa can assist your compliance needs.