Final audit - meaning, characteristics advantages and disadvantages

Final Audit - Meaning, Characteristics, Advantages and Disadvantages

Final audit is also called as the “Balance sheet audit” or the “Periodical audit”. Final audit is started when the books of accounts closed at the end of the year. It is the most satisfactory form of audit from the point of view of an auditor. In this audit there is cent percent checking of the accounts. In case if the business has an effective and proper internal control system. Then the audit sampling is possible.

Characteristics:

The following are the main essentials or features or characteristics of the final audit.

• In one session an auditor make only one visit.

• This type of audit can be conducted on both the large and small type of business.

• It is conducted when the accounting period ended.

• In this audit the auditor can do test checking.

• Auditor report is a prerequisite.

• It is conducted to report to shareholders.

• The audit is completed on a short period.

Advantages of Final Audit

1. Alteration Chances Limited

In the other types of audit the alteration is possible in the audit. But in the final audit the alteration of any type is not possible after the audit.

2. Checking of Complete Record

In the final audit there is complete checking of the books of accounting. He can decide either to check cent percent or by sampling.

3. Advantage for the Shareholders

Final audit serves the shareholders by giving them the most reliable financial information for the investment purpose.

4. Advantage for the Owner

Sometimes the business is so large that even one owner doesn’t know the real position about the business. So final audit throws light on the business position and provides him satisfaction.

5. Convenient or Suitable

Final audit is very suitable for the auditor and client staff. It saves both the parties from continuous disturbance.

6. Saving of Time

In the continuous audit the work of audit is continuous through out the year. It takes a lot of time. But as compare to it final audit takes a very short time. So, in the final audit the time is saved.

7. Legal Demand

Final audit is also helpful in checking either the management has fulfilled the legal requirements or not. The management is bound to fulfill the legal requirement.

8. Economical

Final audit is beneficial for the client. It is not a regular burden on him, because it is conducted only once in a year at the end of the accounting period. So, it gives the maximum benefit with minimum cost.

9. Improves the Efficiency

In this audit the performance of the staff improves due to finding out the weak points of the employees by the auditor by overcome these weakness the staff can improve his efficiency.

10. Submission of Report

About the fairness and correctness of accounts final report is very important for the good will of the company.

11. Staff Duties

In final audit there is no clash of duties between the audit and accounting staff. They performed their work accordingly. The accounting staff remains busy throughout the year in his work and the audit staff his work when the accounting staff ends his work.

12. Convenient for Management

The benefit of final audit is that it is convenient for management as well as for audit staff. The auditor can start and complete the audit at one session. The queries can be cleared on the same day.

13. Minimum Time Period

The time required for final audit is less as compared to continuous audit. The auditors can start and complete many audits. They can raise their income by means of new audit work.

14. Planned Work

The final audit has minimum time. So, the work of audit is completed under planning. An audit programme is maintained which provides the schedule of the working of the audit staff and the principal auditor can control the audit work.

15. Work Continuity

In the final audit the work of audit go through without any break and same way the auditor can be satisfied for the doubt, which raise from his work on the same time.

16. Small Business

The final audit is useful for small-scale business units. The fee charged by auditor is less as compared to continuous work. The small income of business can afford small audit fee.

17. No Relations

The merit of final audit is that it provides no chance to audit staff to develop friendly relation with accounting staff. The accounting staff is not in a position to get undue benefit from audit staff.

18. Full Information

The final audit is useful as it provides full information about business matters. The auditor can take decision on the spot for completion of audit work and submission of audit report.

19. Income of Auditor

This type of audit is also helpful for the auditor. Because this audit saves the time of the auditor and he can conduct many other audit of other business.

20. Information of Client

Final audit serves the shareholder by giving them the most reliable financial information for the investment purpose.

Disadvantages of Final Audit

1. Shortage of Time

The auditor has many clients and their financial year ends on the same date. So it becomes very difficult for the auditor to finish the work in time. It is a disadvantages of final audit.

2. Delay in Report

The decisions of the business are made on the basis of the audit report. But this report is made one or two months late. So there is also delay in the making of important decisions.

3. Complete Checking Not Possible

It is very difficult for the auditor to check the each and every entry made in the books of account. He applies only test to save the time. So many mistakes remain untouched.

4. May Misrepresent

There may be also a chance that audit report may not represent the correctness of accounts because each and every transaction is not checked.

5. No Moral Influence

In this audit there is less pressure on the accounting staff. The audit staff comes once in the year. So the employees are not altering in their work.

6. Late Corrections

In this audit the errors are locate at the end of the accounting period. Some way, the corrections of errors are also late. And the entire producer takes more time.

7. Audit Report

The demerit of final audit is that report is not presented in time. It may be submitted one or two months late. The decisions are to be made on the basis of audited accounts.

8. Planned Frauds

In this type of audit, the management has a whole year to think and decide how to make the frauds. So they commit a planned fraud, which is very difficult to find by the auditor.

9. Previous Year Data

Past data is provided to the auditor for audit in this type of business. The errors and frauds are also previous they have no concern with present or future.

10. Thorough Checking

In the final audit there may not be thorough checking. The auditor may select the sampling. In this way the errors and frauds are not located and the purpose of audit dies.

11. Planning for Future

In the final audit the future planning is not prepared in time because audit work start when the accounting work ends. The audit work is completed late and the projected financial statements are also completed late.

12. Delay in Accounting

For the accounting staff it is not possible to prepare the financial accounts just at the end of the year. Due to audit there is delay in finalizing the accounting matters.

13. Monthly Report

If in a business monthly or quarterly report are required. In this type of business the final audit cannot be conducted.

14. Proper Attention

The auditor cannot pay the proper attention towards the audit because he is bound by the fixed time.

15. Proper Decision

As he is bound by the time period he cannot judge the weakness of the business properly and cannot give the proper decisions to workers.

16. Interim Dividend

The business, which conducts the final audit, it is very difficult for him to declare the interim dividend.

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