Periodical (or) Final (or) Complete Audit

Periodical (or) Final (or) Complete Audit

Annual or Periodical audit is conducted after closing the books of accounts and preparing the financial statements. In such a case, the auditor visits the clients only once in a year and checks the accounts in one visit. The auditor makes a detailed or random check of the transaction which has taken place in the books of accounts and examines the correctness and fairness of the financial statements. This type of audit is free from the defects of continuous audit and carries other advantages with it, but detailed checking is not possible. Hence, errors and frauds cannot be detected easily and quickly.

Features (or) Characteristics

1.  Periodical audit work is done and completed in a continuous session.

2.  The auditor visits the clients only once in a year and checks the accounts in one visit.

3.  Auditor makes a detailed or random check of the transactions and examines the correctness and fairness of the financial statements.

4.  Detailed checking is not possible and hence errors and frauds cannot be detected easily and quickly.

5.        Periodical audit is suitable in case of small business concerns where there are only limited transactions.

Advantages

1.        No Inconvenience and Dislocation in Work: The work of audit does not present any inconvenience and dislocation in the work of the concern as the auditor comes only once in a year.

2.        Less Expensive: Periodical audit is less expensive and more useful for small business concern than continuous audit.

3.        Quick Finalisation of Accounts: In periodical audit, the work of the auditor can be finished quickly and within a reasonable time. The auditor ensures quick completion of work in one session due to continuity.

4.        No Chance of Collusion: In periodical audit there is no undue collusion between the auditor and the clerk as in the case of continuous audit.

5.        No Chance of Tampering Books: The possibility of tampering with the books of accounts during the audit is reduced as the audit work starts only after the books are closed.

6.        Time Effectiveness: The auditor uses statistical sampling methods and techniques which lead to time effectiveness.

Disadvantages

1.  Detailed Checking not Possible: In periodical audit, detailed checking of accounts is not possible and hence there are chances of errors and frauds which remain undetected.

2.  Delayed Presentation of Audited Financial Statements: The work of an auditor starts only after the close of the financial period, therefore there is undue delay in finalising the financial statements and in preparing the audit report.

3.  Difficulty in Fixing Responsibility: Another major drawback is that all the errors and frauds are found at the end of the accounting year, which makes it very difficult to fix responsibility for defalcations.

4.  No Moral Check on Clients Staff: There is no sense of moral check on the employees in clients organisation as the auditor visits the company only after the end of the financial period.

5.        Unsuitable: For big concerns, periodical audit is rarely practicable and it is not much popular for them.