AUDITING

The word audit is derived from the Latin word “Audire “which means to hear. Initially auditor was a person appointed by the owners to check accounts whenever expectation of frauds.

In simple auditing is a process of verification of accounting data with determining accuracy and reliability of accounting statements and report.

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QUALIFICATION OF AN AUDITOR:

According to the Companies Act, 2013, a chartered accountant having a certificate of practice from the Institute of Chartered Accountants of India can be a qualified auditor of a company. As per “Part B” of the State Law Act, 1953 a person holding a certificate stating that he is designated to act as an auditor.

ADVANTAGES / OBJECTIVES OF AUDITING:

To rectify and deduct errors

For taxation purpose auditing of account is must

An auditor act as a trustee of its shareholders

Auditor account helps in managerial decisions

It is useful to take certain financial decisions like issuing of shares, payment of dividend

Auditing safeguards the interest of owners, creditors, investors and workers

Better planning and budgeting

Business improvement

TYPES OF AUDIT:

Statutory audit – Any audit carried on as per requirement of law.

Annual audit – It is a kind of audit where the auditor verifies the account at the end of the financial year.

Interim audit – In normal word interim means half year. It conducts usually between two annual general meetings and only one time not in intervals.

Government audit – The audit of accounts of government department and institutions, government companies and statutory / public corporations is known as government audit.

Continuous audit – Continues audit is an audit which involves a detailed examination of books of accounts at regular intervals that is one month / three months.

Partial audit – An audit which is conducted considering the particular area of accounting is known as partial audit.

Balance sheet audit – It is a kind of audit where the auditor verifies the elements of balance sheet. By the end of auditing the auditor should consider all the books of account for the through verification.

SCOPE / OBJECTIVES OF AUDITING:

PRIMARY OBJECTIVE

SECONDARY OBJECTIVE

TYPES OF ERRORS

Error of omission

Error of commission

Compensating error

Error of principle

Clerical error

Location of error

RIGHTS OF AN AUDITOR:

To check the books of accounts

Auditor should sign the audit report

Attend the general meeting

Right to get remuneration

Enter the name in prospectus

DUTIES AND RESPONSIBILITY OF AN AUDITOR:

Preparation of report – The auditor must make a report to the shareholder regarding the books of accounts kept properly or not, and the Balance sheet, profit and loss accounts is showing true financial position. A report may be positive or negative.

Branch audit – Where a company has branch office, the account of all the branches should be audited by the auditor of head office.

Auditing standards – Every auditor should follow the standards given by central government as well as the income tax act 1961, SEBI guidelines.

To sign the audit report – It is the responsibility of every auditor to put his signature for audit report prepared by him.

To pay the damages – As per section 245 the members of the company have right to give compliance against the auditors if there is any wrong act done by auditor.

Prompt reporting – An auditor of the company should give prompt report by performing his duty whether it is positive or negative.

Winding up – Section 305 says that the audit report is compulsory at the time of winding up / liquidation of the company.

AUDIT REPORT:

Audit report is a written opinion of an auditor regarding the entities of financial statement. The report is to be written in the standard format, as mandated by general accepted auditing standards. The purpose of audit report is to make sure that the documents, profit and loss accounts, balance sheet have reasonable assurance that a company’s financial statement are free of errors and frauds.

THE BASIC ELEMENTS OF AUDIT REPORT ARE:

Report title

Introductory paragraph

Scope paragraph

Executive summary

Opinion paragraph and

Auditors name with signature

THE EARNING OF AN AUDITOR:

The average salary of an auditor in India is between Rs. 6, 00,000- Rs 8, 00,000. With increased professional experience and the right industry, an auditor can earn great salaries. Additionally, many full-time auditors receive great benefits such as healthcare, vacation time, retirement plans and more.

CAREER AS AN AUDITOR:

Auditors are the professionals that prepare and examine financial records. They ensure that the financial records of a company are accurate and that taxes are paid properly and on time. They also assess financial operations and work to help ensure that companies run efficiently.

Internal auditing is considered a stressful occupation because the job is often characterized by heavy workloads, many deadlines, and time pressures.

Although auditing is sometimes jokingly described as a not-so-exciting career involving a lot of long hours, the truth is that it offers both variety and opportunities for continued development.

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