“ Introduction of Auditing ”Published by www.lecturesheet.com
Batch No- 26A51. Md. Ariful Islam Chowdhury ID: B0817212. Md. Nuhas Hossain ID: B0817203. Md. Abdullahil Kafi ID: B0817074. Md. Abul Kalam Azad ID: B081715
INTRO INTRODUCTIONDUCTI Auditing ensures the monitoring authority a review and correctionO mechanism,a paradigm of power –penalty suite. Auditing as anN independent and professional medium emerged,not a part of industrial and business service-but s one separate,unique,independent,a class by itself,aO par excellence,with robes of technical education,expertise,experience andF self-regulated discipline for ensuring standards of quality of work befallenA onto its shoulders.UDIT
Definition of AuditIN •The word “audit” is derived from the Latin word “audire” which means “toTR hear”. The Introducer of the Double Entry system, Luca pacialo mentionedO and descrived the duties and responsibilities of an Audier.DUC •According to Auditing and Assurance Standard (AAS) 1 by ICAI -T "Auditing is the independent examination of financial information of anyIO entity, whether profit oriented or not, and irrespective of its size or legalN form, when such an examination is conducted with a view to expressing anO opinion thereon."F •So we can say that, the term audit generally implies audit of financialAU statements. Audit is a critical and intelligent examination of facts – financialD or other wise, to give in the form of certificate or report an attestation, anIT expert opinion or an expert advise.
IN Objectives of an AuditTRODU • The Objectives of Audit can be categorized into:CT 1) Main ObjectivesI 2) Secondary Objectives, andON 3) Specific ObjectivesOFAUDIT
I Main ObjectivesNT •Expression of expert opinionROD An entity prepares balance sheet to portray its financialUC positions. It also prepares P & L account to disclose the operating results ofT the period covered in the statement. These financial statements areIO submitted to the auditor for his checking and comment. The auditor checksN and verifies these financial statements. Based on his checking in theseO respect, the auditor express his opinion about the quality of the financialF statements concerning proper discloser of facts in the financial statements and the truth and fairness of the financial position and operating results ofAU the enterprise, as disclosed in the balance sheet and profit and loss accountD respectively.IT
Secondary ObjectivesINTRO • There are certain inherent limitations of audit examination.it wouldD not be possible for auditor to discover all errors and frauds,in theU financial statements due to the limitations of his checking. TheCT Auditing and assurance standard(AAS) Describes the secondaryI objectives of Auditing which are mentioned below-ON • The secondary objectives are-OF – Detection and prevention of errors, and – Detection and prevention of errors Frauds.AUDIT
These are descrived as follows-INT 1. Detection and prevention of errorsRODU • Errors are generally innocent but sometimes errors which mightC appear. The following are the various types of errors-TI – Clerical ErrorsON • These errors are committed in posting, totalling and balancing. Such errors may again be subdivided into-OF • Errors of omission; andA • Errors of commission.UDI – Error of PrincipleT – Compensating errors or off- setting errors. – Errors of duplication.
IN 2. Detection and prevention of FraudTRO • Fraud means false representation or entry made intentionally orD without belief in it true with a view to defraud somebody.U • The following are the chief ways in which fraud may beC perpetrated:TIO 1. Embezzlement of CashN 2. Misappropriation of GoodsO 3. Fraudulent manipulation of accounts.FAUDIT
IN Specific objectivesTRO • The Audit not only have primary and secondary objectives, it alsoD have some specific objectives such as review ofU operations.Performance management policy,cost records and soC on.Accordingly,there will be specific objective in respect of each typeT of such specific audits.For example,in operational audit,the aim ofI audit is to evaluate the existing operations of the entity in order toON give expert advice to improve their efficiency.The cost audit is to check the cost records of the entity in order to make a recort on theO proper ascertainment of cost of production of goods orF services.depending upon the nature of specific audit engagement and terms of engagement,there may be different objective in respect ofA each specific audit.UDIT
I Needs of AuditingNTRO • Auditing is needs to add value to information by increasing itsD reliability credibility. Needs of Auditing can be specified as:UC i. For detection and prevention of errorsTI ii. For detection and prevention of FraudsON iii. To ensure true and fair view of the financial statements.OFAUDIT
Difference between Book- keeping, Accountancy and Auditing:I Title Book- keeping Accountancy AuditingN Definition The art of recording Service activity of Systematic and independentT business transaction recording and examination of financialR in the books of reporting. statement and to make anO accounts and its expert opinion.D posting and summarizing.UC Work level It is preliminary task Advanced task Final taskT Nature of Enter the transaction Adjusting and Examining that financialI work posting and preparing financial statement and to express anO summarizing. statement. opinion thereon.N Person Who done this work Who done this work Who done this work is involves is called Clerk. is called Accountant. called Auditor.O Length of It’s a yearly It’s also a yearly Without continuous audit,F work continuous process. continuous process. normally it is involved for 2/3 months.A Qualification There is no required Academic knowledge Auditor must be a charteredU qualification for is required for accountant.D clerk. accountant.I Responsibilitie He/ she must be He/ she must be He/ she must be responsibleT s responsible to the responsible to the to the appointer/ employers Accountant. owner. and third party. Mandatory It is used for all For knowing financial Without registered enterprise. information, it is used organization it is not for all enterprise. mandatory.