Partial audit

Partial Audit: All you need to know about!

A partial audit, as the name suggests, is an audit done for examining a specific area of transactions in an entity, rather than the entire books of accounts from start to end. These are audits in which the terms of the audit engagement place significant constraints on the scope of the auditor’s work. Such an audit may be limited to stock verification only or to other areas of the financial statements.

The auditor is not required to review all of the books of accounts in a partial audit. Only a portion of the accounts or specific transactions, as requested by the clients, may be examined.

A cash audit, for example, is a type of partial audit in which only cash receipts and cash payments of a business concern are examined to determine the correctness of cash transactions and to locate embezzlement of funds if any.


Partial audits are usually adopted in sole trading concerns and small businesses. Conducting an annual audit is not mandatory in these organizations as the audit of accounts of sole proprietorship businesses is not governed by any specific statute. The audit of partnership firms is also not provided under the Partnership Act, 1932. Proprietorship and Partnership firms, though, are required to get a tax audit done under the Income Tax Act on satisfying the prescribed criterion.

Now, even if an audit is not mandated for small firms, yet such concerns often want to get their books audited voluntarily since it helps them manage their books properly, and audited results are looked upon more reliably by external parties like banks, creditors, lenders, etc. Hence, partial audits become helpful to these concerns where they hold doubts about some specific transactions and want to be assured about the accuracy of a certain set of transactions. They may hire an auditor to conduct a partial audit for a specific area of accounts rather than checking the entire set of books. For instance, to verify inventory items, cash book, banking entries, creditor and debtor transactions, or for valuation of assets.    

Moreover, such an audit may also be sometimes undertaken in big-size companies having several departments to get a part of their business examined. This proves to be cost-effective to them and helps them examine a specific area in detail. However, it should not be a substitute for the annual audit.

Features of Partial audit

A partial audit has the below-mentioned features:

  • Only a portion of the accounts is audited depending upon the client’s requirements. Hence, it takes less time and is cost-effective.
  • This audit helps sole traders to detect frauds and errors wherever suspicion is aroused.
  • It is most suitable for small businesses. However, large companies may also adopt it to review separate departments.
  • It can help to provide suggestions for improvement in accounting & related controls employed in a specific area of operations for example inventory, purchase, billing, etc.
  • This audit does not have any legal backing and thus, holds lesser documentary value as compared to a statutory audit.
  • It is not much used in practice.

Can Partial Audit be followed in limited companies?

In the case of statutory audit, this sort of audit cannot be used. For limited companies, it is compulsory that they get their complete financial records of a given year audited as per the requirements under the statute. As per the Companies Act, 2013, every company, irrespective of its sales turnover or nature of business or capital must have its books of accounts audited by an independent auditor each financial year.

A statutory audit must be a complete or full audit. It cannot be partial. Here all records and accounts of the entity are put under scrutiny to assess whether the year-end financials truly reflect the entity’s state of affairs or not. It is carried out in many organizations such as:

  • Joint-stock Companies, governed by the Companies Act of 2013
  • Banking companies, governed by the Banking Regulation Act of 1949
  • Insurance companies, governed by the Insurance Act of 1938
  • Electricity supply companies, governed by the Electricity (Supply) Act of 1948
  • Co-operative societies registered under the Co-operative Societies Act
  • Public and charitable trusts registered under the Religious and Endowment Acts

Partial report

If all the records and books of accounts have not got audited, but only a part of the accounts are audited, and the auditor gives his report about that part, this report is known as Partial Report.

The auditor should keep in mind while preparing this report that anyone reading it should not view it as a complete audit report. As a result, the auditor should make it quite clear in such a report that he has been appointed for a partial verification and that the report is a “partial report”. The auditor will be held liable for negligence if he does not mention that the report is a partial one.

One should keep in mind that a partial report is somewhat difficult to be treated as reliable proof of evidence as compared to the audit report produced in a statutory audit.


A partial audit does not have legal backing. It can only verify a particular area of transactions but can’t offer an opinion on the truthfulness and fairness of the financial statements. Nevertheless, small business houses use it for the purpose of strengthening control over their operations.

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