Meaning of Interim Audit
The interim audit is the audit that takes place in between the two annual audits in order to determine the interim dividend. It also reduces the amount of labour and time required for the final audit. These audits might be done on a monthly, half-yearly, or quarterly basis.
It refers to the review of books of accounts with the goal of ensuring that transactions are correctly recorded and that the firm is operating in a legally acceptable way prior to the completion of any statutory audit.
It is a two-year audit whose major goal is to identify problems early and take corrective action before they become serious.
Objectives of Interim Audit
1. It is carried out to determine the profit for the period as well as whether the company is able to pay an interim dividend or not, as paying an interim dividend increases the value of the company in the eyes of investors and shareholders.
2. It extensively evaluates the work done by the employees in order to discover and detect fraud early and to increase the efficiency of the personnel.
3. To learn about the interim period's financial situation. Interim financial statements are sometimes needed of audit customers.
4. To boost audit income. When a client asks for an interim audit opinion, this happens.
Characteristics of Interim Audit
1. It's done every six months or so, and it's also known as a half-yearly audit.
2. It is a detailed examination of all transactions entered into or conducted with the company over a specified time period.
3. It is occasionally used to determine the book value of a company's stock.
4. When compared to organisations that do not have an intermediate audit, those that do have an interim audit are thought to be more reliable.
Application of Interim Audit
1. The idea is used to determine the amount of dividend that the company's management intends to declare as a percentage of profits earned.
2. To determine whether there is strong management internal control over business activities on which the management, as well as the external auditor, may rely.
Procedure of Interim Audit
Internal auditing procedures differ from company to company and are dependent on the operations of the company and the volume of transactions; some of the most important considerations are as follows:
1. Examine the organization's level.
2. Analyze the decisions made at the top of an organization's structure.
3. Analyze the organization's operations as well as the industry in which it works.
4. Obtain information on the company from both external and internal sources.
5. Have a discussion with the organization's upper executives or audit committee.
6. Then, take the management representation letter, which states that the data and facts submitted for examination are true and complete in every way.
7. Conduct the audit in accordance with the auditing standards committee's guidelines.
8. Document the working papers gathered by the auditor during the audit.
9. If there is a major misstatement, consider the impact on the business and then submit a qualified audit report, or vice versa.