Interim testing and the timing of the audit. Why does an auditor do it? What types of audit work are normally accomplished in the interim period(s)? How will the level of control risk (high risk vs. low risk) affect interim testing? Define substantive testing. Solution Interim Testing Interim testing/Auditing is auditing of the transactions and financial records in between two actual final audits that are carried out at the end of accounting periods. Why does an auditor do Interim Testing? Auditors carry out interim testing in case of companies that have huge number of transactions ,which need to be verified & vouched to facilitate the final audit & also to save time. This usually is slated or timed to coincide with fiscal Q3 review procedures. Also the company\'s internal control and information processing system are verified & the auditor satisfies himself that he can resort to reduced testing at the year end. This also reduces last-minute strain on company\'s officers in cooperating with the audit personnel --who are able to explain in a thorough manner all points for clarification. Types of audit work normally accomplished in the interim period(s) The extent of audit-work & the dates covered-- in the interim periods ,largely depend on the level of internal control prevalent in the company Areas like inventories, cash receivables and plant records are best tested in the interim periods so as to achieve perfection in their testing , before reporting in the year end audit-reports. Control risk & interim Testing: Control risk is the risk that one or more or a group of material error or fraud that could go undetected despite the presence of the company\'s internal control systems Interim testing/Auditing will definitely help to minimise or lower this risk , as the transactions are vouched by more than one person . But the vice-versa is also true,---ie. More the control risk , more the necessity of interim testing of transactions ,to eliminate errors, frauds of omissions & commissions Substantive testing---- Auditor\'s tool to form an opinion These are audit procedures-- carried out to assert--- that the balances against the account heads appearing in the financial statement / financial records of an entity ,say for inventory,do actually exist,are complete,accurate & valid. Substantive testing is done on various accounting transactions also ,ie. They are analysed & tested in detail, for purposes of reporting..

1. Interim testing and the timing of the audit. Why does an auditor do it? What types of audit work
are normally accomplished in the interim period(s)? How will the level of control risk (high risk
vs. low risk) affect interim testing? Define substantive testing.
Solution
Interim Testing Interim testing/Auditing is auditing of the transactions and financial records
in between two actual final audits that are carried out at the end of accounting periods. Why
does an auditor do Interim Testing? Auditors carry out interim testing in case of companies that
have huge number of transactions ,which need to be verified & vouched to facilitate the final
audit & also to save time. This usually is slated or timed to coincide with fiscal Q3 review
procedures. Also the company's internal control and information processing system are verified
& the auditor satisfies himself that he can resort to reduced testing at the year end. This also
reduces last-minute strain on company's officers in cooperating with the audit personnel --who
are able to explain in a thorough manner all points for clarification. Types of audit work
normally accomplished in the interim period(s) The extent of audit-work & the dates covered--
in the interim periods ,largely depend on the level of internal control prevalent in the company
Areas like inventories, cash receivables and plant records are best tested in the interim periods so
as to achieve perfection in their testing , before reporting in the year end audit-reports. Control
risk & interim Testing: Control risk is the risk that one or more or a group of material error or
fraud that could go undetected despite the presence of the company's internal control systems
Interim testing/Auditing will definitely help to minimise or lower this risk , as the transactions
are vouched by more than one person . But the vice-versa is also true,---ie. More the control
risk , more the necessity of interim testing of transactions ,to eliminate errors, frauds of
omissions & commissions Substantive testing---- Auditor's tool to form an opinion These are
audit procedures-- carried out to assert--- that the balances against the account heads appearing in
the financial statement / financial records of an entity ,say for inventory,do actually exist,are
complete,accurate & valid. Substantive testing is done on various accounting transactions also
,ie. They are analysed & tested in detail, for purposes of reporting.