MEANING AND DEFINITION OF PERIODICAL AUDIT
Periodical Audit is also known as Annual Audit or Final Audit or Complete Audit. This type of Audit is usually done at the end of the year after the preparation of the Final Accounts. The Auditor does the audit work till the time all the account books and statements prepared are verified and his staff. This type is examined by him or an Audit is done only once a year. Such an audit is most suitable and satisfactory as well as practical for small organizations. However, extensive examination of Account Books is not possible under such an audit.
"Periodical Audit is that which starts at the end of the financial year concerning to the Audit. It does not have the advantages of Continuous Audit."
Lawrence R. Dicksee,
"Periodical Audit means such Audit which does not start before the close of the financial year and continues till the time the audit work is completed."
Walter W. Bigg,
DISADVANTAGES OF PERIODICAL AUDIT
Periodical Audit has the following disadvantages:
(1) Lack of Deep Checking-
The commercial organization
writes the account books throughout the year and prepares the final accounts on
its basis only at the end of the year. Audit work takes place only at the end
of the year within a limited time and an Auditor thereby cannot make an extensive
examination.
(2) Slackness in Moral Duty-
This type of audit work does
not leave any moral impact upon the employees because they know that their work
is to be audited at the end of the year and that too after several months. This
makes them careless. It is also possible that by the time audit takes place
they leave the organization for good.
(3) Difficulty in Detecting Errors and Frauds-
The audit
work starts only after the end of the year. The Auditor feels difficulty in
detecting errors and fraud at this stage. Especially when errors and
frauds are intentionally done. Intentional errors and frauds are committed
by the staff of the commercial organization throughout the year, and therefore,
it is not an easy task for the auditor to detect them within the limited time at
his disposal during the course of such an audit.
(4) Delay in Audit Report-
Periodical Audit is done only at
the end of the year- The Auditor takes his own time in the preparation and
submission of the audit report. The management and the shareholders of the
commercial organizations thus have to wait for a long for getting the audit
report.
(5) Inconvenient for Big Trading or Manufacturing Business Institutions-
In large-scale commercial and/or manufacturing organizations the number of transactions taking place is quite large. The production is done on a massive scale and the sales turnover is also quite high. In such cases, Periodical Audit is not suitable for such organizations. Continuous Audit is the best choice for them.
