Advantage of an audit:

Auditing helps to detect and prevent errors and frauds.

Audit helps to maintains account regularly

audit helps to obtain loan.

Generally accepted auditing practice

Auditing is the process of professional exercise confirming to the quality

parameter of generally accepted auditing practice . Auditing is equally concerned
with what is found out as how it is found out.

Generally accepted auditing standards what the term may cannot .it Implies:

1.competency of the auditor 2.In performing audit the work is well planned and
supervised 3.sufficency of data 4.professionalism

Generally accepted auditing standards (GAAS) are a set of systematic

guidelines used by auditors when conducting audits on companies' financial
records.

Competence ,Independence and Confidentiality

Competence- The competence is obtained by practical training and passing

prescribed examination .Chartered Accountants are competent auditors

.Independence- acting without fear and favour .

Who cannot be auditor The following persons are not independent 1}employee of
the company ii}partner of the company iii} a person who has debt.

Confidentiality: An Auditor should keep all information confidential . He should

not disclose in case of legal or professional requirement .

Audit planning and supervision: Auditor must 1. Programme his work 2. Co-
ordinate their work.3.shedule the task 4. Deploy the staff .5.supervise the progress
of the work. 6.Review the findings.7.settings up clear aim for opinion, certification
or advice .
Audit evidence –Audit Evidence must be –Sufficient and Appropriate and test
them to make judgment of opinion .

Audit evidence procedures/ Appropriate auditor performance -1. Compliance

procedures -for large organizations where systematic transactions occur and
maintain internal control mechanism is good.

Compliance procedures seek to test : 1.that the internal control exist .2.that the
internal control is effective. 3.that the internal control has so operates

2.Substantative procedures :checking of evidence for completeness accuracy and

validity within a very good systematic.

Substantive procedures/These transaction communicate one or more of the

following assertions in financial statement viz:

1.Existance: that an asset/liability 2.Right and obligations –has right over the
asset or has right over the liability .3.occurrence-that a transaction happened during
the period. 4.completeness- that all transactions/assets/liability find place in
financial statement without omission . 5.valuations : the monetary value attached to
asset or liability is correct or fair . 6.measurement – that transaction is recorded
proper amount 7. Disclosure –data is disclosed according to accounting
convention.

There are types of gathering Audit EVIDENCE : 1.Inspaction-consists of

examination of records documents of tangible assets. Vouching,scanning
,verification of assets are general auditing techniques used for inspection.
2.observation-means taking part in a process as a witness. 3.Inquiry and
confirmation-inquiry is to solicit information by putting question .confirmation-
consists in getting corroboration for fact supplied 4.computation- consists of
doing arithmetical exercise like totaling,balance extraction etc . .5.analytical
review –consists in computing critical ratios ,comparison etc.

Auditing in depth: Examination of system applied for tracing certain transaction

from the origin to the conclusion investigating at each stage for the record created
with the appropriate authorization .
The Auditor should follow the technique :1. Whether the tenders were
invited for the purchase of the goods 2.whether the order was placed by an
authorized person. 3. He should examine the delivery note. 4.He should examine
the invoice.

Test check- To select and examine A representative sample from a large number
of similar iteams no need no need to check all the transaction.

Test check precautions : 1.check every entry.2 checked should be At random .

3.different period and entry for different check 4.check for large entry .5.check
for entry by different staff 6.avoid cash book audit.

Factor determining size of sample: 1,Internal control system 2.nature and

volume of a business..3.Time 4.Audit Aims 5,Risk tolerance level 6.Previous
history .7.Analytical review .

Compliance to accounting auditing standards and enactments

1.Double entry system of accounting 2. Going concern concept 3.accrual Concept

4.Distinction between capital and revenue expenditure .5.conservatism

Chapter-03

Auditor: An auditor is a person or a firm appointed by a company to execute an

audit.

Independence of auditor ensured by the Indian companies act 1956-1.as

auditor 2.as an advisor 3.In any other manner .

Functions of auditing :1.tax auditing 2.management and operational auditing

3.cost auditing 4.inernal auditing,concurrent auditing 5.information system
auditing 6.Quality auditing 7.energy auditing

The act says that the amount should be shown for services rendered-1.as auditor
2.as an advisor 3.in any other manner .

Financial statement Auditor role- audits them or render the services other than
auditing .

Function of financial statement -1.auditing 2.related services

Related services Auditor perform—1.review.2.agreed upon procedure.3
.compilation

Why is Auditor Important?

Over the course of the audit, which includes audit plans, and audit procedures, it is important for
auditors to ensure that they approach the process with an inquisitive mind.In this regard, it is
important for them to stay open to possibilities of fraud, and improper reporting, that can deliver
the required results.Auditor independence tends to be an extremely important component across
the