The exceptional audit team at GCS Malta has simplified matters for you by outlining what an interim audit is and the benefits and limitations of interim audits.
An interim audit involves preliminary audit work conducted prior to the financial year-end of a client, usually covering six or nine months. Generally, interim audit work involves tests of controls and certain substantive procedures. Such testing mainly focuses on income statement items, although some balance sheet work may also be performed.
There is not always the need to perform an interim audit, depending on the audit strategy, and especially in the case of smaller clients. This is because the auditor would be able to carry out and finalise all audit procedures within a short period of time after year-end. Accordingly, interim audits are often conducted for larger audit clients with a strong internal control function. Such an audit is sometimes also requested by the client itself or required by local regulators.
Objectives and Benefits of Interim Audits
- Conducting interim audits proves to be highly beneficial to both auditors and their clients, especially reporting timeliness, given that interim audit tasks reduce significant work at year-end for the final
- An interim audit also helps the auditors, who would have more time available during peak audit season, to engage in activities for other clients.
- It is an excellent time to understand the client business, identify high-risk areas, and design and plan audit procedures accordingly. This also helps with the early identification of threats and taking corrective measures at an early stage.
- Auditors seek to rely on internal control to reduce audit In this regard, interim audits allow auditors to allocate more time to internal control to detect weaknesses.
- It helps increase the efficiency and effectiveness of the management function and employees concerning the accounting and financial part of the business.
- It is conducted to determine the period’s profit and determine whether the company could pay an interim dividend or not, as interim dividend payment by the company results in added value to the business in the mind of investors and shareholders.
Limitations of Interim Audits
- As already mentioned, interim audits are not suitable for small business organisations with fewer financial transactions.
- There may be a case where figures are altered in the accounts which have already been audited at an interim stage, creating confusion for audit staff at the time of the final audit.
- Interim audits might increase the burden of work for audit staff who need to document testing at the interim stage and the final audit.
- It may disrupt the audit client’s staff when there is both an interim and final audit.
- Minor limitations have also been identified in relation to the restricted amount of work that can be performed during this phase.
Despite the few potential limitations that may arise when performing an interim audit, these would be far outweighed by the various benefits of such methodology if performed effectively.
Why GCS Malta?
At GCS Malta, our team of professional auditors guarantee that all financial statements will adhere to the Maltese legislation no matter if internal or external audits. Contact us today for more information on how we can help you.
