Merits Or Advantages Of Final Audit
Main advantages of final audit or periodical audit can be highlighted as follows:
1. Suitable For Small Firms
Final audit is very suitable for small business concerns with less number of business transactions and resources.
2. Low Cost
Periodical audit or final audit is conducted after the end of every financial year. So, it takes less cost and effort than continuous audit.
3. No Alteration Of Figure
Periodical audit is conducted only after the completion of entire accounting works. So, there is no chance of alteration or manipulation of figures.
4. No Disturbance At Work
In continuous audit, auditor frequently visits the office which may disturb the working environment. But in periodical or final audit auditor visits office only at the end of the accounting period. So, final audit does not hamper regular office work.
5. Reasonable Time
Final audit takes less time than continuous audit because auditing can be performed continuously without break.
6. True Profit Or Loss
Final audit examines the profit and loss account of the company which helps to know the true profit or loss of the business.
7. True Financial Statement
Balance sheet is properly checked by the auditor at the end of every year. It helps to know the actual financial position of the business.
8. Increase Goodwill
Periodical audit provides up-to-date information about profit, loss, financial position of the business. It helps to increase goodwill and image of the business.
2. Shortage Of Time
Disadvantages Or Demerits Of Final Audit
Major drawbacks or disadvantages of final or periodical audit can be highlighted as follows:
1. Chance Of Error
Final audit is conducted only once in a year. So, books of accounts cannot be examined and verified properly. Due to the lack of in-depth checking there is a chance of leaving errors while conducting audit work.
It is very difficult to conduct the audit of whole year in a given time frame.
3. Not Suitable For Large Companies
It is not suitable for large business companies with large volume of transactions and resources.
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4. Low Moral Check
In periodic or final audit, auditor does not visit clients' office frequently. So, staffs may feel free to commit frauds and errors because of no moral pressure.
Pros And Cons Of Final Audit In Short
Pros:
- It takes less cost, time and effort than continuous audit
- It shows actual profit or loss and financial health of the company
- It provides financial data and information to both internal and external users of accounting information
- It does not disturb regular organizational activities
- It improves the image and goodwill of the firm
Cons:
- It is difficult to detect planned errors and frauds
- There is a possibility of misrepresentation of financial data
- It will be difficult for the auditor to finish auditing task in limited time
