Types of auditor: AchievementAn auditor is a person who reports on the accounts of an undertaking or enterprise.Auditors can be classified under four headings. They are: External Auditors: An external auditor perform independent third-partyreviews all the financial records of a company or corporation. He evaluates allAccounting payroll and purchasing records, as well as any documents related toinvestment, stock on loans. Internal Auditors: An employee of a company changed with providing Independent and objective evaluation of the company financial and operational business activities. Including its corporate governance, partnership government agencies. Government Auditors: Auditors employed by the government are calledgovernment auditors. They are employed by state and local agencies. Because theyinternally. Forensic Auditors: They are employed by the corporation, governmentAgencies public accounting firms, and consulting and investigative services firms.They are trained in detecting, investigating, and deterring fraud and white-collarcrime.Generally accepted Auditing Practice:Auditing is a process by which a competent independent person accumulates andevaluates evidence about various assertions contained in financial statement of an entityfor the purpose of determining and reporting the e quality of disclosure of financial
information judging them against how it is found out Auditing is not sweaty search withany foregone conclusion .Nor does it end abruptly with any accidental catch in the auditmesh. Essentially auditing is a process, a Professional exercise, conforming to the qualityparameters of generally accepted auditing is a process a professional exercise conformingto the quality parameters of generally accepted auditing Practices. What is “generallyaccepted auditing standards” cannot be easily defined. Yet it is important one must haveunderstanding of what the term may connote. It implies, among other things thefollowing: Only knowledgeable and independent person carries out the audit. In performing audit the works is well planned and supervise. Sufficient and appropriate audit evidence are gathered and tested before an opinion is farmed. Proper judgment is made of financial statements under audit in the light of professional knowledge of auditor concerning generally accepted accounting practices, special enactments affecting the financial statement, pronouncements of professional bodies having bearing on them.Audit Evidence:An auditor must gather sufficient and appropriate audits evidenced and test them to makejudgment of opinion. In this, there have two issues: What evidence will be relevant to assess with greater reliability? How much evidence is to be obtained?To obtain sufficient appropriate evidence the auditors have to perform two things: 1. Compliance procedures. 2. Substantive procedures.
Compliance procedures:In big organization, transactions may be voluminous and repetitive .if those transactionsoccur systematically within in built checks and balances, it would be unnecessary toverify all the transactions to assess what theses transactions signify. Quite a fewtransactions, if checked would tell what all transactions of the type seek to signify.Compliance procedures seek to test, those are given bellow: The Internal control exists. The internal control is effective. The internal control has so operated throughout the period of audit with continuity.An auditor carries out compliance observation of the system , eliciting responses to hisenquiry form clients, making critical look of the fact against the back drop of controlcriteria.Substantive procedures:By performing compliance procedures, the auditor finds out the efficiency of internalcontrol system. If for instance, the internal control system is found to be effective, canauditor take that all assertions given by the financial statements are true and fair? Whileexistence of good internal control system adds reliability to audit evidence, in can notdispense with checking evidence to substantiate data generated within the system .
In these transactions communicate one or more of the following assertions in financialstatements viz. Existence: That an assets/ liability exists. Rights and obligations: That the enterprise has right over the asset or has obligation over the liability. Completeness: That all transactions / asset / liability find place in financial statements without omission. Valuation: The monetary values attached to asset or liability is correct or fair. Measurement: that a transaction is recorded in proper amount. For e.g. freight paid to bringing machinery is included in transaction pertaining to installation. Revenue or expense is properly allocated to the period e.g.: per- paid expenses accrued income. Disclosure: Data is disclosed according accounting convention statutory requirement.Those seven assertions of financial data may be correct or not. A financial statement maydepict a leasehold right as a freehold right. The auditor has to check to get assurance thatthese assertions are fairly represented in the financial statements. To do this, performancesubstantive procedure.Test Check:In big business houses where the number of transaction to be checked is very large andtime at the deposal of the auditor is little, a few transactions may be checked at random.such a cheek is called test check. All the transaction need not be checked. The method ofchecking the accounts will minimize the work of the auditor.Professor Meig defines:
“Testing and test checking means to select and examine a representative sample from alarger number of similar items”For example while vouching the credit sales a few transaction say for a week per monthmay be checked or the transaction for a few months selected at random may be checked.Again the auditor may check all the transaction for any month may be checked. If thetransactions so checked are all correct and there is no doubt of any error or fraud.Therefore the auditor should be very careful in relying upon the test Check. He shouldapply these checks if he is fully satisfied that the internal check system prevalent isefficient and no suspicion arises in his mind.Precaution to be taken while applying Test Checks: Entries of every description should be checked. Selection of entries to be checked should be at random. Periods and entries selected for the test check should be different at each audit.For Example:The credit sales for the months of July and December were checked during the year1994. Credit sales for other months except July and December should be checkedfor the year 1995. A large number of entries of the first and the last month of the audit period should be checked. The test check should be so arranged that the work done by every clerk is checked.
Test check should be applied to cash book where every transaction should be checked.