Interim audits are becoming an important component of financial governance and internal control of modern companies. Conducted in the middle of the reporting period (ie. quarter or semester), interim audits help detect weaknesses, ensure compliance, and reduce work pressure on year-end audits.
This article comprehensively explains what an interim audit is, its objectives and methods, expected results, and how it differs from an internal audit — along with practical recommendations and a conclusion containing Audithink solutions to simplify the audit process.
What is an Interim Audit?
Interim Audit (also called interim examination or interim assessment) is an audit activity carried out by auditor. - usually an external auditor or independent audit team — at some point in between two full reporting periods (e.g. at the end of the quarter preceding the annual report). The purpose is not to provide a final opinion on the annual report, but to:
- Testing material transactions and balances in the current period.
- Assess the effectiveness of internal control at that time.
- Collect evidence that can be used to reduce the scope of testing in the final audit.
Interim audits are temporary-meaning the results and findings are snapshots at the time of the audit and need to be followed up and revalidated towards the close of the year.
Scope and Terms of Interim examination vs Interim assessment
The terms "interim examination” and" interim assessment " are often used interchangeably. The essence is the same: limited checks that are carried out before the final audit. The focus may include:
- Significant transactions (sales, purchases, salary expenses)
- Main accounts (cash, receivables, inventories)
- Compliance with internal policies and regulations
- Key control procedures (eg. authorization, reconciliation)
Purpose and function of Interim Audit
Interim Audit has several important functions:
- Early detection of errors and fraud. The preliminary findings give management time to improve before the close of the year.
- Evaluation of internal control. Assess whether the controls are effective throughout the year.
- Annual audit efficiency. With some evidence verified, the final auditor may reduce substantive testing or conduct additional, more focused testing.
- Provides management information. Interim reports help management take operational and corrective decisions faster.
- Minimize audit risk. Early testing lowers the risk of major findings at closing.
When and why is Interim testing done?
TimingAbstract: interim Audit is usually conducted in the following periods:
- Akhir kuartal (Q1, Q2, Q3)
- Half year (semester)
- Ahead of important process changes (eg. ERP implementation)
- When there are indications of material risks outside the schedule
Why do auditors conduct interim testing?
- To take advantage of evidence that is still “fresh " (transaction documents are still available and witnesses still remember the context).
- To spread the audit load so that the final audit is more focused.
- To gain an initial understanding of high-risk areas and adjust the final audit plan accordingly.
Determinants of interim coverage:
- Materiality and magnitude of accounts
- Audit results of the previous period
- Change of system or process
- Existing levels of internal control
Interim Audit methods and procedures
Here are the steps and techniques that auditors usually use when conducting interim audits:
- Early planning
- Determination of the purpose of interim testing.
- Identify high-risk areas.
- Coordination with management on time and documentation.
- Prosedur pengendalian (testing controls)
- Verify that the transaction authorization is current.
- Evaluation of bank reconciliation and separation of functions.
- Test compliance with internal procedures.
- Substantive procedure
- Transaction Sampling: select a sample for transaction proof testing.
- Verification of supporting documents (invoice, contract, proof of cash out/in).
- Third-party confirmations (eg. confirmation of large receivables).
- Analytical review
- Compare financial ratios between periods.
- Identify unnatural fluctuations that require further examination.
- Documentation
- Record findings, evidence, and recommendations.
- Prepare an interim memorandum that can be the basis for the final audit postulate.
Sampling technique: auditors often use statistical or non-statistical sampling depending on the purpose (compliance test vs. substantive test).
Results, reporting and follow-up
The results of the interim audit are usually summarized in:
- Management letter: highlighting control weaknesses and improvement recommendations.
- Memorandum audit interim: technical documents for the final audit team.
- List of priority findings: prioritized based on risk and materiality.
Follow-up: management needs to create an action plan with schedules and owner actions. Auditors perform follow-ups on an agreed schedule to verify improvements.
Impact on the final audit: interim findings that are not followed up could magnify the final audit procedure or change the audit opinion if material problems are not corrected.
Difference between Internal Audit and Interim Audit
| Aspect | Internal Audit | Interim Audit |
|---|---|---|
| Executor | Internal audit team | External Auditor or independent audit team |
| Main purpose | Improve operational & control effectiveness | Collect evidence and assess balance / risk prior to final audit |
| Frequency | Sustainable / as planned | Scheduled in the middle of the reporting period |
| Output | Management recommendations, operational reports | Memorandum audit, management letter, bukti audit |
| Independency | Less independent than external | Tend to be more independent (if external auditors) |
| Coverage | More broadly, processes & operations | More focused on the area of material & financial control |
Both complement each other: internal audit can be input for interim auditors; conversely interim findings can help internal teams improve processes.
Benefits and limitations of Interim audits
Benefit of
- Early detection and repair.
- Reduction of annual audit workload.
- The provision of information to management is faster.
- Potential long-term cost savings.
Limitations
- The evidence may not be complete (some transactions have not been completed).
- Changes after the interim may eliminate the relevance of some findings.
- Does not replace a final audit that provides an opinion on the annual report.
Brief Checklist of Interim Audit preparation for management
- Prepare the latest monthly transaction reports (bank, receivables, payables).
- Reconciliation of the main account to the date of the examination.
- Supporting documents: invoice, contract, proof of payment.
- A list of process or system changes since the last audit.
- Access to a finance team that is aware of related transactions.
- Copy of relevant policies & procedures.
Frequently asked questions about Interim Audit
What is an interim examination?
- Interim examination is an examination limited to the period between full reports, aimed at assessing the balance and control at the time of the examination.
What is an interim assessment?
- Interim assessment is another term for interim checks — focus on interim evaluation of risks and controls.
What is meant by interim in an audit?
- Interim indicates the time of execution of the audit not at the end of the reporting period but in the middle of the period (eg. quarter).
Why do auditors conduct interim testing?
- To detect problems early, collect evidence as it becomes available, and reduce the scope of work of the final audit.
What is the difference between internal and interim audits?
- An internal Audit is an ongoing function that is carried out internally; an interim audit is a scheduled examination that is generally carried out by an external auditor for the purpose of an annual audit.
Practical recommendations for Interim Audit management
- Conduct initial coordination between management, finance team, and auditors to determine scope and schedule.
- Prepare as complete documentation as possible so that auditors can work efficiently.
- Follow up the findings immediately with a clear plan of action.
- Consider the use of audit technology for evidence management, tracking findings, and reporting.
How Does Audithink Help Your Interim Audit Process?
Conducting interim audits on a regular basis will improve the quality of reporting and minimize the risk of surprises at the end of the year. To help this process, Audithink's Comprehensive Features offers an integrated audit platform that makes it easy:
- Making checklist and structured audit plan.
- Centralized collection and storage of evidence (documents & photos).
- Real-time finding & risk Dashboard for management.
- Automation of interim reports and integration with accounting tools.
Want to speed up and simplify your interim audit? Contact our team via Contact page.
