(a) The interim audit, as its name suggests, is that part of the whole audit that takes place before the
year-end. The auditor uses the interim audit to carry out procedures that would be difficult to perform at the year-end because of time pressure. The final audit, on the other hand, will take place after the year-end and concludes with the auditor forming and expressing an opinion on the financial statements for the whole year subject to audit. It is important to note that the final opinion takes account of conclusions formed at both the interim and final audit.
Typical work carried out at the interim audit includes:
– consideration of inherent risks facing the company. (Tutorial note: risk would be initially considered at the planning stage, but is, in fact, reassessed at all audit stages.)
– recording the system of internal control.
– carrying out tests of control on the company’s internal control system and evaluating its effectiveness to determine the level of control risk.
– performing sufficient substantive testing of transactions and balances to be satisfied that the books and records are a reliable basis for the preparation of financial statements.
– identification of potential problems that may affect the final audit work. A basic aim is to ensure as far as possible that there are no undetected problems at the year-end.
Typical work carried out at the final examination includes:
– Follow up of items noted at the inventory count.
– Obtaining confirmations from third parties, such as bankers and lawyers.
– Analytical reviews of figures in the financial statements.
– Reviews of events after the reporting period.
– Consideration of the going concern status of the organisation.
(Tutorial note: At the final audit the auditor would carry out tests to ensure that the conclusions formed at the interim audit were still valid.)
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