Are you looking for final audit definition and what are the advantages and disadvantages of final audit? You are in the right place to know the answer.
Final audit is also known as a periodic audit. Final audit may be started after the closure of books of accounts at the end of the accounting year.
It may be started towards the end of the accounting year and goes on until the completion after the end of the accounting year.
There may be 100% percent checking of accounting records. If internal control is effective then audit sampling may be used.
A few items may be tested thoroughly and rest of the items may be considered as checked. The audit staff can complete the audit work within shortest possible time.
See Also: What are the Generally Accepted Auditing Standards
The spare time can be used in other audits. In this way, the auditor is able to check the accounts of various business concerns. The fee charged by audit staff is less as compared to continuous audit.
There is no clash among the duties of accounting and audit staff. There is continuity of work in checking the financial and other relevant records.
There is no pending work or queries on the part of audit staff. It is possible that audit of accounts may be started late due to correction of errors and completion of accounts.
The planned frauds may not be detected due to audit sampling. In this way, the accounts may not show true and fair view.
Anyhow the location of errors and records is the responsibility of accounting staff. When the doubt arises the auditor has the right to start his audit work with suspicion. Let’s discuss various definitions of Final audit are as below:
Final Audit Definition
G. Williams: says that final audit is one which is not commenced until after the books have been closed at the end of the financial year, or which is not commenced towards the end of the financial year and carries through to completion after the end of the year.
See Also: Disadvantages of Continuous Audit
Walter W. Bigg: says that final audit is not commenced until after the end of the financial period, and is then carried on until completed.
R. Howard: says that final audit is carried through to completion in one continuous session. Although it may be commenced before the end of the accounting period, it is completed at least after the end of the financial year.
Advantages and Disadvantages of Final Audit
Advantages of Final Audit
- Economical
The final audit is beneficial for the business. The auditor can complete the work in time. He can charge the fee on the basis of time spent. This audit is economical from the client’s point of view.
- Staff Duties
The audit work is started after the completion of accounting work. There is no clash of duties of accounting and audit staff.
See Also: Purpose of Audit Program
The accounting staffs remain busy for one year. But the audit is started after the end of accounting work.
- Convenient for Management
The benefit of the final audit is that is convenient for management as well as audit staff. The auditors can start and complete an audit in one session. The queries can be cleared on the same day.
- Minimum Time Period
The time required for final audit is less as compared to continuous audit. The auditors can start and complete many audits. They can raise their income by means of a new audit.
- PLANNED Work
The work of audit is completed under planning. The audit program provides the schedule of time for audit work. According to planned work the auditor can control the audit of many business units.
- Work Continuity
The flow of audit work goes on without any break from start till its completion. The continuity of work is beneficial for audit staff to clear their questions. The doubts become clear on the same day
- No Change In Figures
The benefit of final audit is that change in figures is not possible. The audit work starts after the completion of entries.
The books are in the custody of auditors so manipulation is not easy after completion of accounts.
- Small Business
The final audit is useful for small-scale business units. The fee charged by the auditor is less as compared to continuous audit. The small income of business can afford small audit fee.
- No Relations
The merit of the final audit is that it provides no chance to audit staff to develop friendly relations with accounting staff. The accounting staffs are not in a position to get undue benefit from audit staff.
- Full Information
The final audit is useful as it provides full information about business matters. The auditor can take the decision on the spot for completion of audit work and submission of an audit report.
- Thorough Checking
The benefit of final audit is that there is thorough checking of accounting record. There may be 100 percent checking or sampling. In both cases there is thorough checking.
- Legal Requirements
The final checking is used to check that legal requirements have been observed in completing the accounting the accounting work. The management is responsible for legal requirements.
- Performance
The benefit of a final audit is that performance of audit improves. The auditor can determine the weakness of all employees including management. When weakness is eliminated there is better performance.
See Also: What is the Role of an Auditor in an Organization
Disadvantages of Final Audit
- Late Correction
The demerit of a final audit is that errors are located after the end of the year. The corrections of errors take time so long errors are not corrected the accounts are incomplete.
- Accounts Delayed
The demerit of a final audit is that delay occurs in the preparation of accounts. The accounting staffs are unable to close its accounts exactly at the end of the year. There is a delay in finalizing the accounting matters.
- Audit Report
The demerit of a final audit is that report is not presented in time. It may be submitted one or two months late. The decisions are to be made on the basis of audited accounts.
- Low Moral Check
The drawback of a final audit is that it has less moral pressure on employees of the business concern. The audit staffs come after one year. The employees are free to commit errors and frauds for twelve months.
- Planned Frauds
The disadvantage of a final audit is that planned frauds are not detected. The employees have one full year at their disposal to think, plan and commit frauds. The auditors may fail to discover frauds.
- Past Data
The audit of accounts relates to previous year’s facts and figures. The past year is a part of history. Whether there were errors or frauds in the books of accounts it has no concern with present or future.
- Thorough Checking
The drawback of a final audit is that there may not be thorough checking. Audit sampling may be used to complete work. In this case, errors and frauds may not be located.
- Planning for Future
The budgets and estimates for future may not be prepared in time. As the audit work is started after the end of accounting year it takes time to check the accounting records.
The audit work is completed late. So the projected income statements balance sheets and budgets may be prepared late.
