Distinguish between interim audit and final audit, identifying TWO advantages and disadvantages each. (5 marks)
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Interim audit:
In case of larger client the auditor will often find it necessary to proceed with the audit on an interim basis in view of the volume of testing to be undertaken in order to reach an opinion on the reliability of the records. Interim audit as arranged with the co-operation of the client may be biannual, quarterly or even monthly, depending on the volume of audit of audit work considering necessary. In this case the auditor decides to conduct an audit to a particular period within the accounting period.
Advantages
1. It is possible to produce interim accounts for dividend payment.
2. Interim Accounts can be used for application for extra finance (overdraft or Short term loan)
Disadvantages
1. Figures may be altered after the audit work. (2.5 marks)
Final and Completed audit applies to smaller concerns where the volume of transaction and complexity of records do not require the auditor’s attendance more than once each year. This visit normally takes place as soon as the business’s financial year ends and continues until it has been completed and the audit report signed.
Advantages
- It enables the audit to be planned more efficiently in that audit staff can follow the audit program or the timetable without interruption.
- The work is done at a go thus avoid the need to return to uncompleted work
- Alteration of figures may be avoided
Disadvantages - There may be difficulty in allocating staff if the Audit Firm has many clients who have the same accounting period.
- Delay may occur if the client does not have competent staff and there are problems with the schedules or the internal controls. This may affect the completion of the accounts to be presented to shareholders.