i) Outline two purposes of conducting interim audits. ii) Evaluate the drawbacks of conducting an interim audit in a business.

i) Outline two purposes of conducting interim audits.
ii) Evaluate the drawbacks of conducting an interim audit in a business.

(a) Purposes of conducting interim audits
It is usually done mid-way the year. It is important to companies that usually declare interim
dividends. The balance sheet transactions are left out and only profit and loss account is dealt
with.
Advantages
• It is ideal for dynamic businesses.
• Compared to continuous audits it is cheaper.
• It facilitates final audits.
• Up to date accounts are kept.
• Errors and frauds are prevented and detected at an early stage compared to final audits.
• Essential in a partnership in which some partners are retiring or when a new partner is
being admitted into the business.
• Essential when mergers and take-overs are being contemplated.
• Facilitates the calculation of interim dividends.

ii) Drawbacks of conducting an interim audit in a business
Disadvantages
• Errors are at an-advanced stages compared to continuous audits.
• Managers may manipulate accounts so as to conceal profit if they do not want to pay
interim dividends.
• Over dependence on audit staff to solve accounting problem.
• Figures already checked can be altered by audit staff or management.

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Kavungya answered the question on May 14, 2019 at 12:34

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