A final or completed audit is commonly understood to be an audit which is not commenced until after end of the financial period and is then carried on until completed.
The final audit takes place only after the end of the trading period when all the transactions for the whole year are completely recorded and balanced; Trading and Profit & Loss Account, and Balance Sheet have been prepared. The auditor carries on his audit work continuously till it is completed.
The auditor gets hold of the books of accounts, documents, vouchers, bills and full facts relating to the accounting period under review.
In an annual audit, the auditor visits his client only once in a year and the audit work is commenced and completed in a single uninterrupted session.
This type of audit is very much convenient and useful for business houses, which are small. For big ones, continuous audit is more useful because the work involved in them is voluminous and hence final accounts cannot be prepared at the close of the financial year.
Characteristics of Annual or Periodical Audit
The basic characteristics of annual or periodical audit are listed down below:
1. In case of annual audit, generally audit work commences after the close of the financial year.
2. Audit work is carried on and completed in a continuous session.
3. Auditor visits the client’s office only once in a year and keeps on doing the work until it gets over.
4. It is suitable for small scale concerns.
Advantages of Annual or Periodical Audit
The advantages of annual or periodical audit are as follows:
1. No Dislocations in the Work of Client: In case of annual audit, as the auditor visits the client’s office only once a year the office work is not unnecessarily disturbed.
2. Less Chance for Alteration of Figures: As audit work is done only in a one continuous session, chance for alteration of figures is minimum.
3. Less Expensive: It is a less expensive system and suitable for small business houses.
4. Takes only Reasonable Time: The audit work can be finished quickly within a reasonable time.
5. Proper Maintenance of Link in Work: As audit work is done and completed in a continuous session, link in work can be properly maintained.
6. Easy Allocation of Work: In continuous audit, work can be allocated easily according to time schedule.
Disadvantages of Annual Audit or Periodical Audit
Following are the disadvantages of annual audit.
1. More Chances for Fraud: Auditor may not be able to check and verify all the transactions. Hence there is every chance that some of the errors and frauds may be left undetected.
2. Delay: The audited accounts may not be available immediately after the close of the year. It may cause delay in the declaration of dividends and holding annual general meetings. The decisions of vital importance may be delayed due to the lack of audited and verified information.
3. No In-depth Checking: In annual audit detailed checking of accounts is not possible for the auditor. Thus, there is greater chance of errors and frauds being left undetected
4. Unsuitable to Large Scale Concerns: For large scale concerns, periodical audit is rarely practicable and it is not much popular for them.