Interim audit is such an audit, which is conducted for a part of the year with some interim purpose, for instance, declaration of interim dividend by an incorporated company. Interim audit may also be needed in the case of a partnership firm at the time of admission or retirement of the partners. This type of audit is conducted between two periodical audits.
Feature of Interim Audit
- Interim audit is conducted for a part of the accounting year.
- Interim audit is conducted with some interim purpose.
Application of Interim Audit
- In financial institute where audited accounts are required after every one month, three, months and six-month.
- In those concern where interim dividend is declared.
- In partnership firm when new partner is admitted or retired.
- It is conducted during the trading period.
- It is conducted before final audit.
Advantages of Interim Audit
- Publication of interim figures
Due to interim audit publication of interim result is made possible.
- Financial position of business
The client will know the financial position for the said period he can compare the results with the previous period and can make plan on the basis of result during the year.
- Moral check
There will be a moral fear on the staff as the auditor will be in during the period of interim audit. touch
- Early location of errors
Errors and irregularities are found out earlier than in the system of final audit.
- Speedy completion of final audit
As the major work has already been done so,the interim audit help to speed up the completion of final audit at the end of financial year.
- Authenticated interim figures
The audit will be more useful to have authenticated interim figures for publication during the year. Which enable the management to declare interim dividend.
- Help to improve performance
The management with the help of interim audited account evaluate its performance and if find some deficiencies the can management can take the remedial measure to improve the efficiency.
- Trend of business activities
The comparative study of interim audit reports enables the management to learn the trend of business activities.
- Staff intimacy
The audit staff come to business for a short time period and the whole work is performed in one sitting therefore there is lesser chances of Staff intimacy.
- Encourage the investors
The interim audit report give up to date audited result for a particular period and enable them to take decision for investment in a particular business.
Disadvantages of Interim Audit
- Alteration in audited figure
There is great danger of altering figures in the accounts already checked during interim audit.
- Additional work
This type of audit involves additional work in the form of preparing notes after completion of interim audit.
- Extra financial burden
It is not legal requirement to conduct interim audit in a joint stock company. It is optional and audit fee paid to the auditor is an extra burden on business due to this the expenses of business increased.
- Audited results are not final
Interim audited result is not final. It can be change at the time of final report so it is useless for investor because there result do not provide proper guideline to them.
Due to extra burden on fund the small business unit cannot effort it. Thus this unit does not avail the benefit of interim audit.
- Create disturbance for accounting staff
The accounting record is taken over by the audit staff which causes the disturbance for accounting staff. Now they are unable to record any transactions this cause the dislocation of their work.