Continuous controls monitoring definition
/What is Continuous Controls Monitoring?
Continuous controls monitoring (CCM) is the use of automated tools to examine business transactions as they occur. A CCM system automatically pulls certain data elements from a database of transactions and reviews all of these data elements. The intent is to conduct a complete scan of the data for control breaches, errors, possible segregation of duties problems, and anomalies from what is expected. The review is conducted by comparing the data to a set of tables that contain permitted transaction authorizations, allowable boundaries for detecting anomalies, itemizations of fields that must be completed for a standard transaction, and so forth. These tables are set up for each major transactional area, such as for inventory recordkeeping, payroll, accounts payable, travel and entertainment, and customer orders.
Advantages of Continuous Controls Monitoring
A CCM system can reduce the need for manual internal control reviews. In addition, external auditors can rely upon a CCM to some extent when designing their audit procedures, which reduces the cost of their audit. Thus, the net cost of a CCM is somewhat reduced when its full effects are considered.
Disadvantages of Continuous Controls Monitoring
A CCM system is relatively expensive, so this approach to auditing is not typically available to a smaller organization. Another concern is that auditors might assume that the system is detecting all possible issues, when in reality it is only probing for the error types programmed into it; this means that auditors must still search for other error conditions.
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Examples of Continuous Controls Monitoring
By comparing the tables to the data, a CCM can spot potential control problems, which are then reported to management on a real-time basis. Here are several examples of CCM tests:
For the proper authorization of supplier invoices for payment
For the accuracy of inventory picking transactions
For the completeness of customer orders
For the issuance of customer invoices within __ hours of shipments to customers
For the authorization of credit memos related to unpaid customer invoices