The document provides a comprehensive overview of auditing, including its definitions, objectives, types, and advantages, along with preparatory steps before conducting an audit. It discusses statutory audits, government audits, and voluntary audits, emphasizing their significance in ensuring accurate financial reporting and compliance with applicable laws. The document also details the roles of various professionals in the auditing process and various types of audit records necessary for effective auditing.

1. INTRODUCTION TO AUDITING

2. Contents
1. Introduction
2. Meaning, Definition and Objectives,
3. Differences between Accountancy and Auditing,
4. Types of Audit,
5. Advantages of auditing,
6. Preparation before commencement of new audit,
7. Audit note book, Audit working paper, Audit program,
8. Recent Trends in Auditing,
9. Nature and significance of Tax audit, Cost audit,
Management audit.

3. Auditor is like Watchdog, not Bloodhound
Auditors like to say their role is that of a watchdog (who barks
when they see something suspicious) rather than a bloodhound
(who actually searches for something suspicious).

4. • An audit is a systematic and independent
• examination of books of accounts,
• statutory records,
• documents and vouchers of an organization
In order to ascertain how far the financial
statements present a true and fair view of the
concern.
Meaning of Auditing
The word Audit is derived from the Latin word “Audire” which means “to hear”.

5. Definition
Spicier and Pegler
An audit is such an examination of the books, accounts and vouchers of a business as it
enable the auditor to satisfy that the Balance Sheets is properly drawn up, so as to give a
true and fair view of the state of the affairs of the business and whether the profit and loss
accounts gives a true and fair view of the profit or loss for the financial period according to
the best of his information and explanations given to him and as shown by the books, and if
not, in what respects he is not satisfied.
A.W. Hanson
An audit is an examination of such records to establish
their reliability and the reliability of statement drawn from
them.
R.B. Bose
Audit may be said to the verification of the accuracy and
correctness of the books of accounts by independent
person qualified for the job and not in any way connected
with the preparation of such accounts.

6. International
A/c standard
committee
A/c Standard
Board of Institute
of CA
Guide &
Develop the
Process of
AUDITING

7. Objective
Primary
Verification of Book
of A/c (P/L, Ledger,
Statement
Secondary
Error
&Fraud
Expert
Opinion
Error of A/c Principles
Error of Omission
Error of Commission
Duplication

8. Difference
Records
of Financial
Statements
Only knowledge of A/c
Financial
Position
Done by
Internal Employee
Accounting
Appointment
by
Mgmt.
Only for Current Year
Examine the
Records
knowledge of A/c +Auditing
Credibility of
Firm
Done by
External
Auditing
Appointment
by
Shareholder
@ AGM
Previous Year

10. On the basis of Organization
Audit Enforced by Law
• Companies ruled by the Companies Act,2013
• Banking organizations ruled by the Banking Regulation Act,1949
• Electricity supply corporations ruled by the Electricity Supply Act,1948
• Co-operative Societies certified beneath the Cooperative Societies Act,1912
• Civic or humanitarian trusts enrolled beneath distinct Religious and Endowment Acts.
• Specified entities beneath distinct sections of the Income Tax Act,1961
• Certified Clubs, associations, etc. enrolled beneath Societies Registration Act, 1960

11. Statutory Audit
Statutory Audit is a type of audit which is mandated by a Statute or Law to ensure true and
fair view of the book of accounts of a Business is presented to the Regulators and the Public.
Company
• All companies (Private Limited Company, Public Company) - If the company is incurring
loss even then statutory audit is required.
• One Person Company, Limited Company.
• Section 8 Company – NPO,NGO
• Producer Company,
irrespective of nature of business and sales turnover must appoint a qualified Chartered
Accountants who are independent to the Business.

13. Comptroller and Auditor General of India
On 7th August 2020, Girish Chandra
Murmu has been appointed as the new
Comptroller and Auditor General of India
(CAG.)
Earlier, he was the Lieutenant-Governor
of Jammu & Kashmir Union
Territory. Before him, Rajiv Mehrishi
assumed the CAG office on 25 September
2017.

15. 10 November: The CAG submits
a report on 2G spectrum to the
government, stating a loss of
₹176,000 crore (US$22 billion)

16. 1. Government audit is applicable to Government departments and departmental
undertakings.
2. Government of India maintains a separate department known as Accounts and
Audit Department.
3. Comptroller and Auditor General of India heads this department.
4. Government audit is divided into several branches like Défense, Railways, Posts
and Telegraphs audit. It works only for government offices and departments.
5. The government audit is the means through which public management is
verified and controlled.

17. Audit of Trust organisations
1. Section 11 of Income Tax Act,1961 provides exemptions
2. Income earned from property held under charitable trusts/societies for the activities
carried out on charitable or religious purposes subject to certain terms and conditions.
3. Income received in the form of voluntary contributions with a specific direction that
they shall form part of corpus of the trust or institution.
Audit is mandatory for claiming exemption under section 11 and 12,
1. where the total income of the trust computed without giving effect to the provisions of
section 11 and 12 exceeds Rs 2,50,000 in any previous year, then the accounts of the trust
for that year should be audited by a Chartered Accountant.

18. Audit Under Voluntary Class
Certain organizations which perform voluntary audit:
•Proprietorship concern
•Partnership organization
•Hindu undivided family
•Federation of individuals
•Non-profit organization.

19. Advantage of Audit
1. A/c Correction
2. Detect Errors
3. Morale Check
4. Assist in Decision
Making
5. Stake holder
Confidence
6. Loan from Bank
7. Proper Valuation
8. IT Return
9. Settlement of
Claims
Save Time
Increase Efficiency
Maintain Uniformity
Control

20. Preparation Before Auditing
Auditor send prerequisite for auditing
1. Nature & Scope of his Duty
2. Engagement Letter
3. List of Books in use( list of
employee, duties)
4. Book of Original
Entry(Ledger, trial Balance)
5. List of Schedule of Assess
and Liabilities
6. Previous auditor Consent
Letter
7. Time of Audit
8. Time required
9. Certificates of clients
10. Old reports

21. What is an Audit Engagement Letter?
• The audit engagement letter confirms the auditor’s acceptance of the audit and
includes the responsibilities’ objective, scope, and extent of the audit.
• Issuance of the engagement letter is one of the procedures to be followed before the
commencement of an audit and is in response to the appointment for a new audit
assignment.

28. An audit team will be sent depending upon the size of the company.
Trial Balance
A trial balance
is a financial
report showing
the closing
balances of all
accounts in the
general ledger at
a point in time.

30. Content of Audit Notebook
Diary/Register of Audit staff to note error/records input
1. List of Books of Account
2. Names & Duties of
officers
3. Particular of Missing
receipts & Vouchers
4. Mistake & Error
detected
5. Points cover attention of
Auditor
6. Contract
7. & Meeting minutes
Extracts
8. Date of commencement
& competition of Audit

31. Purchases Day Book
• Purchases book or purchases day book is a book of original entry maintained to record credit
purchases.
• You must note that cash purchases will not be entered in purchases day book because entries in
respect of cash purchases must have been entered in the Cash Book.
• At the end of each month, the purchases book is totaled.
• The total shows the total amount of goods purchased on credit.
• Purchases book is written up daily from the invoices received.
• The invoices are consecutively numbered.
• The invoice of each number is noted in the purchases book.

32. Sales Day Book
• A sales book is also known as sales day book in which are recorded the details of
credit sales made by a businessman.
• Total of sales book shows the total credit sales of goods during the period
concerned.
• Usually the sales book is totaled every month.
• The sales day book is written up daily from the copies of invoices sent out.

33. Return Inward Book
• Sales returns book is also called returns inwards book.
• It is used for recording goods returned to us by our customers.
• Customers who return goods should be sent a credit note.
• It is a statement sent by a business to customer showing the amount credited
to the account.

34. Return Outward Book
• Purchases returns book is a book in which the goods returned to suppliers are
recorded.
• It is also called returns outward book or purchases returns day book.
• Goods may be returned because they are of the wrong kind or not up to sample or
because they are damaged etc.
• When the goods are returned to the suppliers, intimation is sent to them through
what is known as a debit note.
• These debit notes serve as vouchers for these entries.
• A debit note is a statement sent by a businessman to vendor, showing the amount
debited to the account.

39. Audit Working Paper
1. Bank Reconciliation
Statement
2. Adjustment Entries
3. Statement of Depreciation
4. Minutes Detail
5. Document Evidence
6. Advice to client
7. Guide for next year
8. Training for clerk
9. Certificate of bed debts

40. Audit Program

41. Nature and significance of Tax audit

42. Nature and significance of Cost Audit

43. Nature and significance of Management audit.