Audit

WHAT QUALITIES SHOULD AN AUDITOR POSSESS?

·       An Auditor should possess highest degree of Integrity.

·       He should be adequately Independent

·       He should have excellent knowledge of Law

·       He should be able to understand special features of business

·       He should have basic human qualities

·      He should also have knowledge of accounting principles and techniques

WHAT IS THE OBJECTIVE OF AUDIT?

The objective of Audit has been defined in SA 200, which lays down that basic objective to conduct an Audit is expression of an opinion by the auditor on whether the financial statements are prepared in accordance with applicable financial framework.

An Audit conducted in accordance with SA’s enables the auditor to form that opinion.

HOW MANY TYPE OF ERRORS ARE THERE?

There are 4 types of errors, which are as follows

·      Error of Commission – These are mistakes that happen while drawing up the accounts like mistake in totalling.

·      Error of Omission – Sometimes some entries are mistakenly left out.

·      Principle error – When basic principles or procedure are not followed while making accounts, it is known as Principle Error

·      Error of Duplication – When one entry is posted two times, it is error of duplication.

WHAT ARE THE BASIC PRINCIPLES OF AUDIT?

The following are the basic principles of Audit –

·      Integrity, Objectivity and Independence

·      Confidentiality

·      Skills and Competence

·      Documentation

·      Planning

·      Audit Evidence

·      Audit Conclusion and Reporting

WHAT ARE THE INHERENT LIMITATIONS OF AUDITING?

The following are the inherent limitations of Auditing –

·      Nature of Financial Reporting

·      Nature of Audit Procedures

·      Timeliness of financial reporting and balance between benefits and cost

·      Other matters

WHAT ARE THE ADVANTAGES OF AN INDEPENDENT AUDIT?

The following advantages accrue by an independent audit –

·      Safeguard financial interest

·      Moral check on employees

·      Settling liability for taxes

·      Settling trade disputes

·      Detection of wastages and losses

·      It checks whether books have been properly kept

·      Settlement of accounts in case of death or admission of a partner