What is final audit or periodical audit? Explain its advantages and disadvantages.

According to Spicer and Pegler, “a final or completed audit is commonly understood to be an audit which is not commenced until after the end of the financial period, and is then carried on until completed.” In simple words final audit is an audit which is done after the financial period is over and the accounts are ready. It is continued in a session until the complete audit work is over. It is also known as Annual or periodical audit.

Its advantages of periodical audit as under:

There is no danger of alteration of figures after the auditor has checked the accounts since the audit work is started only after the accounting work is over i.e., final accounts had been prepared.

Since the audit work is started after the accounts have been finalized, there is no question of dislocation of client’s work.

Since the audit work is done continuously after it has started, there is no question of audit staff losing thread of the work.

There is little or no chance of collusion between audit staff and client staff. The audit staff does not make frequent visit in final audit as is in the case of continuous audit.

Client’s staff will be careful not to leave any error undetected lest it should reported by the auditor. The client staff will be regular in maintaining accounts due to the fear of surprise visit by the auditor.

As compared to continuous audit, audit work does not become monotonous in final audit. The audit work is carefully divided among the audit assistants

The cost of final audit is far less than that of continuous audit.

In final audit there is little or no chance of manipulation in impersonal accounts by passing fictitious entries.

Disadvantages: There are may disadvantages of final or periodical audit:

In final audit, work is done only after the final accounts had been prepared. The errors and frauds can be detected only after the financial period is over i.e. after a year.

In case of, final Audit, due to large number of transactions and shortage of time it is not possible to conduct detailed and close examination of accounts.

In final audit the auditor has to rely on test checking and internal check and control systems. As such there are greater chances of errors and. frauds being not detected.

It may not be possible to present the audited accounts soon after the close of the financial year. There are a number of companies where audited accounts are required immediately after the close of the financial year. Hence, presentation of accounts the annual general meeting may be delayed.

Final audit alone is less suitable for big concerns.

In final audit due to lack of time, the auditor has to rely on he employees. The trusted servants of the company may misrepresent the facts to the auditor to conceal their frauds. Hence, there are greater chances of fraud and misrepresentation by the management.