What is an Interim Audit?
An interim audit is type of auditing strategy that is normally utilized at some point during the current fiscal year. This type of audit makes it possible to complete at least some of the tasks that are involved with the preparation of a final audit once the fiscal year has closed. The benefit of this approach is that it is possible to provide shareholders and other interested parties with final audit data sooner than if the final audit was commenced after the fiscal year was completed.
Like any type of auditing task, an interim audit will involve close examination of financial records. Interim auditing standards are the same as those used to conduct any type of accounting or inventory check, and must comply with all policies and procedures that are part of the final audit process. This is necessary since the data collected and analyzed during the interim auditing has a direct effect on the outcome of that end-of-year audit.
While a continuous audit and an interim audit are sometimes confused, the two approaches are actually very different. A continuous audit typically provides audit information that is accurate up to a specified date within the fiscal year. For example, a continuous audit may be conducted monthly, with each new audit showing changes that occurred since the last audit period.
In contrast, an interim audit is normally covers a longer time period and is intended to make it possible to expedite the completion of a final audit. It is not unusual for this type of audit to cover the first three quarters of the fiscal year, making it possible to complete a number of auditing tasks that will not require repetition when the analysis of the fourth quarter is undertaken. The end result is that much of the work for the final audit is completed before the end of the fiscal year, and the task of finishing that audit at the new year gets underway is much less daunting.
Typically, an interim audit does not result in the issuance of formal reports that are widely shared with investors or the general public. Officers and management of the company are normally made aware of the results of the audit, since the data may indicate the need to address some specific issue regarding stock, reporting procedures or some other aspect that impacts inventories. Formal reports are not released until the final audit is completed and the auditors are ready to release their final opinions on the status of the company’s accounting processes and tracking mechanisms that make it possible to document each financial transaction.
It makes sense that most companies don't share the results of an interim audit with the general public and their shareholders. After all, it sounds like the results are hardly the official, end of the year results. It sounds like an interim audit is almost like a snapshot of where the company is at that moment.
Also, I bet an interim audit gives the company a chance to correct any small problems. So why would they want to share that information with their shareholders, when everything will be fine by the end of the fiscal year?
@sunnySkys - That sounds like an interim audit to me, although it is on a smaller scale. I used to work for a company that would actually do interim audits as well as continuous audits. The boss was a real stickler for record keeping, but his business practices paid off throughout the year.
There were several times when we were able to catch a serious financial issue before it got out of hand because we were paying attention to what was going on. I definitely think an interim audit internal is a good idea for any company.
My boyfriend works as a wedding DJ. He's an independent contractor, so taxes aren't taken out of his paycheck. He has to pay them himself every quarter. So he isn't a big business or anything like that, but he definitely has to do a lot of accounting and record keeping.
He actually does something like the interim accounting describe in the article. Every year in January, he makes sure all his records are correct and he has all the receipts for his deductions.
He also makes sure he's been paying the correct amount of estimated taxes. Then, when tax time comes everything is organized and it's much easier to do his taxes.
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