PRINCE PRINCE PRINCE
MADE BY: SAQIB SHAIKH Page
NOTES ON AUDITING
Audit is independent examination of financial statements of an entity with the objective of expressing opinion whether these financial statements are free from material (quantitative,qualitative) misstatements (fraud, error).
SCOPE OF AUDIT:
Scope of audit refers to the audit procedures necessary to achieve the objective of audit.
Scope of an audit is govern by auditing standards, local laws (i.e. SECP), and guidance issuedby auditors professional organizations (i.e. ICAP).
OBJECT OF AN AUDIT:
Responsibility for the preparation and presentation of financial statement is of themanagement of company, the responsibility of an auditor is to express an opinion on thefinancial statement based on audit.
Audit enhances the credibility of financial statements.
uture visibility of company is not guaranteed.
The auditor is not responsible for a subsequent discovery of material misstatements untiland unless it is proved that the auditor is:
Involved with the management in the fraudulent activities.
An absolute assurance is not provided by auditors because:
ork of the auditor is permeated by judgments
ost audit evidences are persuasive rather than conclusive.
Audit is of test nature.
Internal control has inherent limitations.
Not all the items in the financial statements are tested. The testing is based onsampling.
Audit evidence some times indicates what is probable, not certain.
internal control is the system design by the management to prevent,detect and correct fraud and error (fraud and error can not be completely eliminated butcan be reduced lower acceptable level).
Code of ethics: