5. Detailed audits desirable in small concerns.— Many small firms do not feel able to employ perma nently the services of a highly paid and thoroly compe tent bookkeeper, and find it more economical to employ an ordinary bookkeeper permanently and engage a pro fessional auditor for the purpose of making a de tailed audit. The detailed audit will result in dis closing errors of principle as well as fraudulent en tries, and the small number of transactions will allow a verification of each one separately. It is not possi ble to lay down rules that will apply to all cases ; ac cordingly, the proprietor will do well to leave the question of the amount of detailed work to be done to the judgment and discretion of his auditor.
6. Completed audit.—The term "completed audit" is used to designate an audit made covering a com plete period which has elapsed since the last examina tion. This type of audit is sometimes called a pe riodic audit since it covers an entire period and the examination is made at the close of the period. Be fore the audit is begun, the proprietor should see that the bookkeeper has all subsidiary ledgers in balance, and that the trial balance of the general ledger is in balance, and that the aggregate balance of any sub sidiary ledger agrees with its controlling account. Locating errors in these balances is not a part of the auditor's work unless he is specifically employed for the purpose, and where the records are not in proper shape for the auditor to commence his work, he will consult with the proprietor on the method of pro cedure. It will usually be better to postpone the audit until the bookkeeper has located his errors.
7. Continuous audit.—Where a continuous audit is undertaken, the auditor will appear from time to time during the business period and make such in vestigations as he deems necessary. Not infrequently the auditor will be asked to attend at least once a month and make a report of progress to the proprie tor. In some instances, especially where the infor mation to be derived from a monthly profit-and-loss account and balance sheet will prove helpful, the audi tor will be expected to prepare a balance sheet and a profit-and-loss statement at the end of each month. Continuous audits, however, are usually distinguished from completed audits by the fact that in the latter the auditor does not report until the end of the audit pe riod at which time he presents a balance sheet and profit-and-loss statement covering the period, while in continuous audits he will attend as a rule, monthly, and may or may not make up a balance sheet and profit-and-loss statement each month.
8. Advantages and disadvantages of continuous audits.—The majority of business concerns end the fiscal period with the end of the calendar year, and this results in considerable congestion of work in the offices of professional auditors. It is evident that if some of the work involved in a detailed audit can be accomplished before the end of the year and at a time when auditors are not so busy, the proprietor will be able to receive a verified report of his financial stand ing much sooner than he otherwise would. More over, if fraud is being practised, a continuous audit will usually result in its earlier detection, altho where continuous audits are made there is an opportunity afforded to dishonest individuals to practise fraud by tampering with the past record which the auditor has already checked. This can be guarded against by the auditor. The continuous audit also has the effect of keeping the work of the clerical staff up-to-date be cause bookkeepers realize that if they are behind in their work, a report to that effect will undoubtedly reach the ears of the proprietor thru criticisms on the part of the auditor. There is also the advantage of the moral effect which the more frequent visits of the auditor will have upon those intrusted with the duty of keeping the record or handling affairs.
9. Completed and continuous audits compared.— Many practitioners prefer the completed audit to the continuous audit, because the latter requires consid erable extra time and labor to guard against inter ference with records that have already been audited. On the other hand the continuous audit serves to bring the proprietor and the auditor in closer touch.
More opportunity is afforded for consultation between the proprietor and his trusted adviser on matters of business policy, improvement in organization and bet ter methods of handling the accounts. A considera tion of the circumstances surrounding each case will enable the auditor to make the proper recommenda tions to his clients as to which type of detailed audit should be employed.