A mid-term review is an audit strategy used during the fiscal year to prepare for the final audit. It involves examining financial records and complying with audit standards. It differs from a rolling audit, which provides information accurate to a specific date, and typically covers the first three quarters of the fiscal year. Interim audits do not involve issuing formal reports until the final audit is complete.
A mid-term review is the type of review strategy that is typically used at some point during the current fiscal year. This type of audit allows you to complete at least some of the tasks that are involved in preparing for a final audit after the fiscal year closes. The advantage of this approach is that audit data can be provided to shareholders and other interested parties earlier than if the audit were initiated after the completion of the fiscal year.
Like any type of auditing business, an interim audit will involve a close examination of your financial records. The mid-term audit standards are the same as those used to conduct any type of audit or inventory audit and must comply with all policies and procedures that form part of the final audit process. This is necessary as the data collected and analyzed during the interim audit has a direct effect on the outcome of that year-end audit.
While a continuous audit and an interim audit are sometimes confused, the two approaches are actually very different. A rolling audit typically provides audit information accurate to a specific date within the fiscal year. For example, a rolling audit may be conducted on a monthly basis, with each new audit showing the changes that have occurred since the last audit period.
Conversely, an interim audit typically covers a longer period of time and is intended to help expedite the completion of a final audit. It is not uncommon for this type of audit to cover the first three quarters of the fiscal year, making it possible to complete a series of non-repeating audit activities when the fourth quarter review is undertaken. The end result is that much of the final audit work is completed before the end of the fiscal year, and the task of finishing that audit in the new year is much less daunting.
Typically, an interim audit does not involve issuing formal reports that are widely shared with investors or the general public. Company officers and directors are typically made aware of the audit findings, as the data may indicate the need to address some specific issue related to inventory, reporting procedures, or other aspects affecting inventories. Formal reports are not released until the final audit is complete, and the auditors are ready to release their final opinions on the state of the company’s accounting processes and monitoring mechanisms that help document every financial transaction.
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