Auditing Introduction
Auditing B.com The Latin word “Audire,” which means “to hear,” is where the term “audit” originates. Verifying the financial status as reported by the financial statements is known as auditing. In order to determine if the financial statements present a truthful and fair picture of the financial status and
gain or loss for the company. The knowledgeable and critical assessment of the reliability, sufficiency, and correctness of accounting data and accounting statements is called an audit. Various authors have provided varying definitions of auditing; among these are:
What is Auditing
The methodical review of financial accounts, documents, and associated activities to ascertain compliance with declared requirements, management guidelines, and generally accepted accounting principles is known as auditing. -R.E.Schlosser
Objectives of Auditing
The goals of auditing are evolving together with business technique advancements. In the past, it was limited to verifying that payments and invoices were accurate. The auditing’s goals have been divided into two categories:
1) Primary goal
2) Secondary goals
Finding the dependability of the financial situation and profit and loss statements is the primary goal of the auditing process. Making ensuring the accounts present a true and fair picture of the company and its transactions is the goal. The goal is to confirm and establish that, as of a certain date, the profit and loss account provides the true and fair picture of profit or loss for the accounting period, and the balance sheet displays a true and fair view of the business’s financial situation.
One of the primary goals of auditing is the detection and prevention of fraud, which is one of its subsidiary aims. The other goals of the auditing process are as follows: 1. Fraud is the term for deliberate
misrepresenting financial data. The following are examples of fraud: a. falsifying, manipulating, or altering records or papers; b. misappropriating assets.
c. Eliminating the impact of transactions from documents or records.
d. Documenting transactions that lack substance.
d. Inappropriate use of accounting principles
2. Error detection and prevention: this is yet another crucial auditing goal. The purpose of
auditing is to make sure that the financial statements are accurate. By carefully reviewing and attesting ledger accounts, books of accounts, vouchers, and other pertinent data, errors can be found.
Auditing B.com Importance of Auditing
The fact that even corporations not regulated by the Corporations Act have their financial statements audited indicates how important auditing is. It is now required for all commercial and even nonprofit organizations. One way to sum up the significance of auditing
in the ensuing points:
A lone trader can determine the worth of their business for the purpose of selling with the aid of audited accounts.
b. It is possible to prevent disputes regarding profit accuracy.
c. From audited accounts, shareholders who are unaware of the day-to-day operations of the company can assess the management’s performance.
d. It assists management in identifying and stopping fraud and mistakes.
b. The auditors advise management on financial matters.
f. Creditors, both short- and long-term
Auditing B.com Types of audit
1.Proprietary Audit: The owner decides whether to have the accounts audited in the event of proprietary problems. The nomination of the auditor and the scope of the audit shall be decided by the sole trader. The auditing activity will be contingent upon the audit agreement and the particular guidelines provided by the owner.
2.Partnership Audit: The partnership conducts an accounting audit to remove any room for confusion and uncertainty. A partnership agreement that is mutually agreed upon by the partners may include provisions for financial statement audits. The appointment of the auditor is contingent upon the assent of each partner. The mutual agreement outlines the rights, responsibilities, and obligations of the auditor and allows the partners to make changes.
3.Audit of Companies: In India, an audit of a company’s financial statements is required by the Companies Act. A professionally certified chartered accountant is necessary for the audit of a company’s accounts. The Companies Act of 1913 established the first requirement that
joint stock businesses should have a certified accountant audit their books. The Companies Acts of 1956 and 2013 have undergone several revisions pertaining to the designation, responsibilities, qualifications, authority, and obligations of competent auditors.