What is the audit started and continued before the end of the financial year called?

Difference

ContinuousAudit

Final Audit

Interim audit

1. Cost of Audit

Continuous audit is costly as the auditors spend greater time and make detailed checking of book of accounts so auditor charges their fees accordingly.

Final Audit is least expensive in terms of cost as the auditor makes test checking and whole work is performed once only.

The interim audit is costly than a final audit but economical than the continuous audit due to the proportion of auditors time spent.

2. Suitability

Continuous audit is suitable for

·         Large scale business

·         Multi-National Companies

·         Companies having long volume of transactions

Final audit is suitable for

·         Small scale business

·         Medium scale business

·         Large scale business

Interim audit is suitable for

·         Medium scale business

·         Large scale business

3.  Sampling

In continuous audit sampling is not used by the auditors. They examine the whole population and majority of transaction.

Auditors make full use of sampling techniques to reduce their workload and to reach sound conclusions without examining each and every transaction.

The auditors are usually able to select large sampling size and they can examine the items on a recurring base.

4. Time of Conduct

Continuous audit is usually conducted on yearly basis and auditors attend office regularly.

Final audit is started at the end of financial period or when the books of accounts have been closed.

Financial year is divided into two or three interim financial periods and work of audit is started soon after the end of interim period.

5. Objective

The objective of continuous audit id easy and early rectification of errors and frauds.

The objective of final audit is to determine and show the true and fair view of financial statement.

Interim audit examines the books of accounts and other record up to a particular period.

6. Internal Control System

In a continuous audit, the internal control system of entity is analyzed in great detail and useful recommendations are made for its improvements.

In case of final audit, there must be an effective internal control system in an organization.

In case of interim audit, there must be an effective system of internal control in an organization but not as essential as in case of final audit.

7. Check on Accounting Staff

On account frequent and surprise visits of the auditor, continuous audit imposes greatest amount of psychological pressure on the accounting staff.

Final audit exerts least amount of psychological pressure on accounting staff as the auditor examines books of accounts only after the end of accounting year.

Auditor examines the books of accounts either once or twice during the accounting year or also after the end of accounting year therefore, value of interim audit as a check on accounting staff is less than continuous audit nut it is more than final audit.

8. Seasonal Industries

Continuous audit is not a useful type of audit for seasonal industries.

It is most suitable type of audit for seasonal industries.

It may not be a suitable type of audit for seasonal industries.

9. Alteration in Figures

Accounting staff knows that the entries that have been checked by the auditor will not be checked again during his next visit. Therefore, a dishonest clerk may alter figures in the books of accounts that have already been checked by the auditor at his previous visit, and the frauds may be perpetrated.

As the audit is completed in one continuous session, and once the records are delivered to the auditor they are not accessible by the accounting staff, therefore, there is no chance of such manipulation and alteration in figures.

The entries checked during interim audit hare not rechecked at the time of final audit, and after interim audit accounting records kept under the custody of accounting staff, therefore, there are chances that the Accounting staff may make alteration in the records.

10. Reporting

As the work is c complete after the accounting works so the auditor is liable to issue his report soon after the end of accounting period.

It usually takes long time for the auditor to complete the audit, resolve his queries and issue the report.

The report is issued relatively earlier than the final audit.

11. Extent of Checking

A continuous audit, audit work continues throughout the year, therefore, the auditor has ample time and he can make detailed checking of the transactions.

The extent of checking is moderate and depends on eth auditor’s’ assessment of risk, materiality and sampling considerations.

The extent of check is lower than continuous audit and more than a final audit.

12. Regular

It is a regular feature of business as it is conducted every year.

It is a regular feature of business as it is conducted every year.

It is a not a regular feature of business as it is conducted occasionally.

13. Detection and Prevention of Errors

Continuous audit is more effective in detection and prevention of errors. As the errors are corrected as they are detected.

Chances of detection of errors and frauds are lesser in final audit due to smaller sample size.

In interim audit, errors and frauds can be detected and prevented more effectively as compared to final audit.

14. Third Party’s Interest

Third parties have some interest in continuous audit as it serves their purpose.

Third parties have some interest in final audit as it serves their purpose.

Third parties have no interest in interim audit as it does not serve their purpose.