SCOPE AND BASIC PRINCIPLES OF GOVERNING AUDIT

  SCOPE  AND BASIC PRINCIPLES  OF GOVERNING AUDIT

AUDITING

Ø  SCOPE OF AUDITING

  AUDITING IS CONCERNED WITH THE VERIFICATION OF ACCOUNTING DATA AND DETERMINING THE RELIABILITY AND ACCURACY OF FINANCIAL STATEMENT.

  NEW CONCEPTS OF AUDITING LIKE TAX AUDIT,COST AUDIT,MANAGEMENT AUDIT,OPERATION AUDIT HAS ENHANCED THE SCOPE OF AUDIT. THE PURPOSE OF THE AUDIT HAS EXTENDED TO AUDIT OF COST ACCOUNT MANAGEMENT POLICIES,MANAGERIAL EFFICIENCY ETC.

  THE MAIN PURPOSE OF THE FINANCIAL AUDIT IS THAT AUDITOR HAS TO DETECT ERRORS OR OMISSIONS COMMITTED BY ACCOUNTANT AND HIS STAFF WHILE PREPARING FINANCIAL STATEMENTS AND TO CERTIFY THE CORRECTNESS OF FINANCIAL STATEMENTS.

  SCOPE OF AUDITING

  THE AUDITORS SHOULD NOT ONLY CHECK THE ACCURACY OF ACCOUNTS BUT SHOULD ALSO SATISFY HIMSELF WHETHER THE BOOKS OF ACCOUNT SHOW A TRUE POSITION

  VERIFICATION OF ACCOUNTING DATA:-

1. EXAMINATION OF ARITHMETICAL ACCURACY OF ACCOUNTS
2. VERIFICATION OF BOOKS OF ACCOUNTS BY COMPARING IT WITH VOUCHERS,INVOICES,DAY BOOK,MINUTE BOOK,CORRESPONDENCE ETC
3. VERIFICATION AND VALUATION OF ASSETS AND LIABILITIES AS SHOWN IN THE BALANCE SHEET
4. ON THE BASIS OF FINDING,REPORTING TO CLIENTS
5. THE TERMS OF REFERENCE UNDER THE CONTRACT WILL DETERMINE WHAT IS REQUIRED TO BE DONE
6. THE AUDIT REPORT SHALL BE JUSTIFIED BY THE WORK OF AUDIT
7. THE EXTENT OF AUDIT WORK IS DETERMINED AS PER THE DIRECTION OF THE AUDITOR
8. REVIEWING THE INTERNAL CONTROL SYSTEM BY THE AUDITOR
9. TESTS CHECKS MAY BE CONDUCTED  TO DETERMINE THE ARITHMETICAL ACCURACY OF THE ACCOUNT DATA
10. SUPPORTING EVIDENCE
11. SATISFACTION TOWARDS CORRECTNESS OF ENTRIES PASSED
12. IN CASE OF DOUBT AND SUSPICION PROPER PROBING AND VERIFICATION

Ø  TECHNIQUES OF AUDITING

1.       CHECKING AND POSTING AND CASTING

2.       COUNTING AND PHYSICAL EXAMINATION OF VARIOUS ASSETS

3.       CONFIRMATION OF TRANSACTION FROM EVIDENCE AVAILABLE AS FROM OTHER SOURCES

4.       MAKING INQUIRY

5.       SCRUTINY AT THE END OF YEAR

6.       RE COMPUTATION OF VARIOUS CALCULATIONS ALREADY MADE

7.       TRACING OF BALANCES CARRIED FORWARD IN THE SUBSEQUENT PERIOD

8.       BANK RECONCILIATIONS STATEMENTS USED FOR BANKING TRANSACTIONS

Ø  BASIC PRINCIPLES GOVERNING AN AUDIT

1. INTEGRITY,OBJECTIVITY AND INDEPENDENCE:-IMPARTIAL ATTITUDE,FREE FROM ANY INTEREST WHILE CONDUCTING AN AUDIT
2. CONFIDENTIALITY: THE INFORMATION ACQUIRED DURING AN AUDIT SHOULD BE CONFIDENTIAL
3. SKILL AND COMPETENCE:-SHOULD BE CONDUCTED BY THE PERSON WHO HAVE ADEQUATE TRAINING AND EXPERIENCE
4. WORK PERFORMED BY OTHERS:-REMAINS RESPONSIBLE FOR EXPRESSING HIS OPINIONS ON FINANCIAL INFORMATION WHEN HE DELEGATES WORK TO HIS ASSISTANTS

5. DOCUMENTATION:-MUST PREPARE AND PRESERVE ALL THE DOCUMENTS WHILE CONDUCTING AN AUDIT
6. PLANNING:-THE AUDIT PLAN SHOULD COVER :_

1. CLIENT'S ACCOUNTING SYSTEM,POLICIES AND INTERNAL CONTROL SYSTEM
2. TO WHAT EXTENT INTERNAL CONTROL SYSTEM CAN BE RELIED
3. DETERMINING THE AUDIT PROCEDURES
4. COORDINATING THE AUDIT WORK

7. AUDIT EVIDENCE:- SUFFICIENT APPROPRIATE EVIDENCE AND IT SHOULD BE OBTAINED BY SUBSTANTIVE AND COMPLIANCE PROCEDURE
8. ACCOUNTING SYSTEM AND INTERNAL CONTROL:-ON THE BASIS OF ACCOUNTING SYSTEM AND INTERNAL CONTROL HE WILL DETERMINE NATURE,TIMING AND EXTENT OF AUDIT PROCEDURES
9. AUDIT CONCLUSIONS AND REPORTING:-EXPRESSION OF HIS OPINION ON FINANCIAL STATEMENTS ON THE BASIS OF HIS REVIEW AND ASSESSMENT OF AUDIT EVIDENCE AND KNOWLEDGE OF BUSINESS AND IT INVOLVES OVERALL CONCLUSIONS.

1. FINANCIAL INFORMATION HAS BEEN PREPARED USING ACCEPTABLE ACCOUNTING POLICIES
2. FINANCIAL INFORMATION COMPLIES WITH RELEVANT REGULATIONS AND STATUTORY REQUIREMENTS
3. ADEQUATE DISCLOSURES OF ALL MATERIAL MATTERS