Interim audit and final audit

Most large audits will be split into two phases. Much of the systems assessment work and transaction testing will be carried out on the interim audit (taking place perhaps two-thirds of the way through the year) with the balance of the work and testing of statement of financial position items taking place at the final audit shortly after the year end.

A number of key benefits may arise from spreading the work across interim and

final audit such as:

1. More flexible resource planning within the firm – the timing of interim audit is typically more flexible than the timing of final audit. This helps reduc demand for audit staff during ‘busy season’ (traditionally the first few months of a calendar year when many clients require their final audit to take place)
2. Earlier identification of significant matters
3. Shareholders and other users receive audited accounts earlier
4. Increased audit efficiency
5. ISA 330 also states “The higher the risk of material misstatement, the more likely it is that the auditor may decide it is more effective to perform substantive procedures nearer to, or at, the period end rather than at an earlier date”.
6. Typical interim audit procedures include: Understanding the entity, assessing inherent risk (see ISA 315) and identifying significant matters which will be reflected in the subsequent audit strategy and audit plan.
7. Recording, evaluating the design and testing the entity’s system of internal control.
8. Performing substantive testing to ensure the books and records are a sound basis for performing the year end audit.

Typical final audit procedures include:

1. Substantive testing. Note that where substantive testing was performed at the interim phase auditors typically test the subsequent period between interim audit and period end.
2. Tests to ensure conclusions formed at interim audit remain valid
3. Obtaining third party confirmations such as bank letters and trade receivables confirmations