An interim audit involves preliminary audit work that is conducted prior to the fiscal year-end of a client. It is part of audit work where audit testing is performed on interim financial statements. It is a kind of audit that is conducted between the two periodical or balance sheet audits.
Disadvantages of Interim Audit –
- Interim audit is not suitable for small business organizations with a less financial transaction. It disturbs the working environment in the office. Regular office activities may be hampered because of audit work.
- Figures may be altered in the accounts which have already been audited. Already audited accounting figures may be changed by a dishonest employee. It creates confusion in the minds of audit staff at the time of the final audit.
- It increases the expenses of the business. Such an audit is not compulsory, it is optional for management, and so audit fee is an extra expense for the business. This type of audit only increases the expenses of business because it is not compulsory by law.
- It will mean that the audit staff will have to prepare notes when they finish the interim audit. Audit notes have to be prepared after the completion of an interim audit. It increases the burden of work. It is not a part of the final audit. So this audit work is treated as an additional workload.
- Interim audit is an additional work because the final audit must be conducted after conducting this audit too. It is an attempt by the auditor to prevent the accounting staff from changing the facts and figures.
- It creates trouble for accounting staff. When the audit staff collects accounting books, the client’s work suffers, as the books are not available for making entries.
One of the demerits of the interim audit is that it may not provide a guideline to third parties. It has no use for the third party because this audit is used only to improve the efficiency and effectiveness of the accounting system. The management may be interested in such an audit for any purpose. So irregular audit cannot be used for future plans.