Interim Audit

Interim Audit Meaning

Interim Audit refers to the examination of books of accounts with the objective of checking the recording of transaction correctly and working of the company in the manner legally acceptable before the conduct of any statutory audit. It is an audit which is conducted between two financial years and its main objective is early identification of threats and taking corrective measures at an early stage.

Objectives of Interim Audit

  • It is conducted to find out the profit of the period along with determining whether the company could pay an interim dividend or not, as interim dividend payment by the company results in value addition of the business in the mind of investors and shareholders.
  • To identify and early detection of fraud and to improve the efficiency of the employees as it thoroughly examines the work done by the employees.

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Characteristics

  • It is conducted between two periods; it sometimes may also be called a half-yearly audit.
  • It is an in-depth analysis of all the transactions entered into or transacted with the business over a defined period.
  • It is sometimes conducted to determine the book value of a share of the company.
  • The organization whose interim audit is conducted is considered more reliable as compared to those whose interim audit is not conducted.

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  1. Auditing I: Conceptual Foundations of Auditing
  2. Auditing II: The Practice of Auditing

The procedure of Interim Audit

The procedure of internal auditInternal AuditInternal audit refers to the inspection conducted to assess and enhance the company's risk management efficacy, evaluate the different internal controls, and ensure that the company adheres to all the regulations. It helps the management and board of directors to identify and rectify the loopholes before the external audit.read more varies from business to business and depends on the working of business enterprise and the voluminous of transactions; some of the essential outlay points are as follows:

Interim Audit Procedure

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Applications

  • The concept is used for determining the amount of dividend which the management is planning to declare as a part of profits earned by the company.
  • To check where there is robust internal control of the management on the business activities and on which the management, as well as the external auditor, could rely upon it.

Benefits

Limitations

  • It is only to be used by management, and it does not have any connection with investors or lenders, etc.
  • It only covers the financial part of the organization, but the business has several other aspects also to be reviewed for better results.
  • It increases the burden, and mental pressure on the working staff as their work is checked by some outside person.
  • The risk of manipulation of data rises to hide the things from being reported or detected.
  • Sometimes due to error in the determination of profits accurately to shareholders, funds of the company may arbitrarily decrease.

Conclusion

‘Interim Audit’ is the way by which the management itself checks whether they are complying with the regulatory requirements or not. This audit is the preliminary step to gather information on the business conduct and considers as an integral part of the statutory audit or final audit. Such an audit is conducted sometimes on the request of the business entrepreneur or sometimes on account of easiness of the work to be done by the statutory auditor at the time of the final audit. Sometimes some legal requirements need to be complied with lay upon some entities for conducting an interim audit at the end of every quarter.

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