1. Continuous audit:
The audit, which continuous throughout the financial year with regular or irregular intervals is called continuous audit.
Advantages:
a. Early location of errors:
In this type of audit the books are checked soon after the entries are made. So errors are located at early stage.
b. Check on frauds:
Continuous checking is very good in controlling the frauds because books are examined after certain regular or irregular intervals.
c. Quick rectification:
In continuous audit the auditor easily located errors and it corrected early stage.
d. Up to date accounts:
Accounts of business are kept up to date by the staff because they know that auditor may visit and check the accounts at any time.
e. Specific attention:
Before the ending of accounts an auditor has a sufficient time to a pay proper attention to the checking of accounts and delegation of frauds and errors.
f. Guidance to clients:
The auditor touch with the business details, so he also indicates about the mistakes and gives valuable suggestions to the client to keep the accounts in proper manner.
g. Useful for interim dividend:
Continuous audit is also very useful in preparing the interim dividend without any delay. At any time directors of the company are willing to pay the interim dividend to the shareholders they can do so.
h. Chance of overlooking reduces:
Auditor has a close contact with the details of the accounts and he has also sufficient time to check the records. So the chance of overlooking is reduced in this type of audit.
i. Quick presentation of accounts:
Continuous audit is very useful because accounts are maintained regularly. So as the financial year ends final audited accounts are presented before the shareholders.
Disadvantages:
a. Alternation of figures:
Already checked figures of accounts may be altered by the dishonest staff and frauds may be committed.
b. Inconvenience:
A regular checking and frequent visits of an auditor may disturb the work of clients and is staff.
c. Expensive:
Continuous audit is more costly as compared to other kinds of audit such as final and interim audit. Because the auditor has to devote more time to the audit.
d. Mechanical work:
The work of audit becomes too mechanical because it remains continue throughout the year.
e. Queries problem:
If the auditors two visits interval is long then so many queries remain outstanding.
2. Interim audit:
Interim audit is the audit which is conducted between the center of financial year for the purpose of finding the interim dividend. It may be monthly, after three months, or half yearly. When any partner or owner or director or a businessman wants to know the reliable result during the financial year, then such type of audit may be applied.
Advantages:
a. Publication of interim figures:
In some cases the publication of interim figures is necessary. So in such cases interim audit is very helpful.
b. Easy/quick detection of errors:
By conducting the interim audit errors and frauds can be easily located in time.
c. Check on staff:
When the staff of the client knows that at any time during the year accounts are checked for the interim period then they will not commit any fraud.
d. Completion of final audit:
If interim audit is conducted then final audit can be completed very soon and easily.
e. Suggestions implementation:
In case of interim audit auditors suggestions can be quickly implemented.
f. Satisfactory work:
Staff of the client may work with proper attention satisfactory along with the advice of the auditor.
Disadvantage:
a. Disturbance:
The disadvantage of this audit is that it disturbs the office work of the client.
b. Burden of work increases:
Audit staff will have also to prepare the audit notes when they will finish the interim audit. So the burden of work rises in this way.
c. Additional work:
The demerit of interim audit is that there is additional work load on audit staff. It is not a part of final audit. So this audit work is treated as additional workload.
d. Increases business expenses:
The demerit of interim audit is that it results in increased business expenses. Such audit not compulsory. It is optional for management and so audit fee is an extra expense for business.
e. Figures alternation:
The limitation of interim audit is that the accounting staff can alter figure after the completion of audit. it create confusion in the minds of audit staff at the time of final audit.
3. Final audit:
An audit which is started at the closure of the books of accounts at the financial year when financial statements are finalized and it is carried out unit completion case of Joint Stock Company it is compulsory by law.
Advantages:
a. Alteration chances limited:
After the final audit it becomes it is easy for anyone to change the figures of accounts for his benefit.
b. Checking of complete record:
In case of final audit the whole record is supplied to the auditor for checking. So all the facts about the accounting year are before the auditor.
c. Advantages for the shareholders:
Final account is very helpful for the shareholders to know the real position of the company. Due to final accounts they feel more satisfaction. Because they know about the financial position of the company during the year.
d. Advantage for owner:
Sometimes the business is so large that even one owner does not know the real position about the business. So he doesn't give full time to every field in the company because the owner only performs one task on single time. So the final audit provides him satisfaction about the business position.
e. Suitable:
Final audit is very suitable for the auditor and client staff. It servers both the parties from continuous disturbance.
f. Saving of time:
The auditor visits the client’s office once a year and goes on checking until the audit is completed. In this way time of both parties is saved.
g. Legal demand:
For Joint Stock Company audit is necessary. So final audit has an advantage that it fulfills the requirement of law.
h. Improves the efficiency:
All the financial year client staff remains vigilant and efficient due to the fear of final audit.
i. Submission of report:
Submission of report is very important because the fairness of accounts and correctness of accounts the final report is very important for the good will of the company.
Disadvantages:
a. Audit Report:
The demerit of final audit is that report is not submitted in time. It may be submitted one or two months late. The decision is to be made on the basis of audited accounts.
b. Delay in report:
When the work of audit will not be completed in time audit report cannot be shown to the share holders. So it creates many difficulties for the company’s business and goodwill.
c. Complete checking not possible:
It is very difficult for the auditor to check each and every entry made in the books of accounts. Sometime He only lightly checks to save the time. So many mistakes remain unchecked.
d. May misrepresent:
There may be a chance that audit report may not represent the correctness of accounts because each and every transaction is not checked.
e. No moral influence:
The auditor comes once in a year so he has no moral effect on the client staff to sustain the books correctly.
f. Low moral check:
f. Low moral check:
The drawback of final audit is that it has less moral pressure on employees of business concern. The audit staff comes after one year. The employees free to commit errors and frauds for twelve month.
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