FUNCTIONS OF AUDIT :- Following are the most important functions of an audit. 1. Study The Accounting System :-It is the basic function of auditing. In order to determine the nature, timing and extent of the audit procedures auditor should study the accounting system. 2. Internal Control System :- It is a process which determines that management policies are carried out according the accounting principles. This system is very useful to safeguard the interest of the enterprise. The auditor determines the effectiveness of this system. Our company uses to ensure the proper accounting principles are followed by doing auditing. 3. Vouching :- This function is essential to determine the accuracy of accounting record. This checking the vouchers with supporting documents which support and prove the business transactions. All entries in books of accounts are made on the basis of relevant vouchers. 4. Verification Of Assets :- It is the function of auditing that it should verify the assets of the business. It is concerned with the determination of value, ownership and possession of business asset. The auditor can check the existence of asset. 5. Legal Requirement :- It is the function of auditing to verify that statements are prepared under the legal requirements or not. There are various laws like company andincome tax ordinance which are introduced by the govt. 6. Liabilities Verification :- The liabilities of the business can be verified from the books of accounts. The auditor can write a letter to the creditors for the verification of liabilities. The auditor must receive the certificate from the management in this regard. 7. Capital And Revenue :- Auditing should make difference between capital and revenue items. The capital items are compared to note the financial position of the business. The revenue items are compared to determine the income. The income and expenses related to many years can be divided in current and coming year. 8. Valuation Of Liabilities :- Through auditing value of liabilities can be checked from the books of accounts and other papers. The auditor can also confirm the value from outside sources. The value of liabilities is given in the balance sheet by the management but it is the function of auditing which confirms this value. 9. Valuation Of Assets :- The management gives the value of assets and auditor can apply the accounting principles to assess the value of assets. The auditor critically examines and takes help from the expert. 10. Reporting :- Auditing important function is reporting. Auditor is an independent person and it is his duty to submit his report in writing. If he is satisfied he can present clean report otherwise he can give qualified report. Elements of the Generally Accepted Auditing Standards (GAAS) The generally accepted auditing standards (GAAS) are the standards you use for auditing private companies. There are 3 elements of GAAS. General Standards: The first three GAAS are general standards which ad.

1. FUNCTIONS OF AUDIT :-
Following are the most important functions of an audit.
1. Study The Accounting System :-It is the basic function of auditing. In order to determine the
nature, timing and extent of the audit procedures auditor should study the accounting system.
2. Internal Control System :-
It is a process which determines that management policies are carried out according the
accounting principles. This system is very useful to safeguard the interest of the enterprise. The
auditor determines the effectiveness of this system. Our company uses to ensure the proper
accounting principles are followed by doing auditing.
3. Vouching :-
This function is essential to determine the accuracy of accounting record. This checking the
vouchers with supporting documents which support and prove the business transactions. All
entries in books of accounts are made on the basis of relevant vouchers.
4. Verification Of Assets :-
It is the function of auditing that it should verify the assets of the business. It is concerned with
the determination of value, ownership and possession of business asset. The auditor can check
the existence of asset.
5. Legal Requirement :-
It is the function of auditing to verify that statements are prepared under the legal requirements
or not. There are various laws like company andincome tax ordinance which are introduced by
the govt.
6. Liabilities Verification :-
The liabilities of the business can be verified from the books of accounts. The auditor can write
a letter to the creditors for the verification of liabilities. The auditor must receive the certificate
from the management in this regard.
7. Capital And Revenue :-
Auditing should make difference between capital and revenue items. The capital items are
compared to note the financial position of the business. The revenue items are compared to

2. determine the income. The income and expenses related to many years can be divided in current
and coming year.
8. Valuation Of Liabilities :-
Through auditing value of liabilities can be checked from the books of accounts and other
papers. The auditor can also confirm the value from outside sources. The value of liabilities is
given in the balance sheet by the management but it is the function of auditing which confirms
this value.
9. Valuation Of Assets :-
The management gives the value of assets and auditor can apply the accounting principles to
assess the value of assets. The auditor critically examines and takes help from the expert.
10. Reporting :-
Auditing important function is reporting. Auditor is an independent person and it is his duty to
submit his report in writing. If he is satisfied he can present clean report otherwise he can give
qualified report.
Elements of the Generally Accepted Auditing Standards (GAAS)
The generally accepted auditing standards (GAAS) are the standards you use for auditing private
companies. There are 3 elements of GAAS.
General Standards: The first three GAAS are general standards which address the qualification
of auditor and the minimum standards for your work product:
· As an auditor, you must have both adequate training and proficiency.
· You are independent in both fact and appearance.
· You exercise due professional care in performing your auditing tasks
Standards of fieldwork: The next three GAAS govern how you actually do your job:
· Your work is adequately planned, and all assistants are properly supervised.
· You gain an understanding of the client and its environment, including internal controls,
to assess the risk of material misstatement in the financial statements and to plan your audit.
· The evidence you gather during the audit is appropriate and sufficient to evaluate
management’s assertions on the financial statements.
Standards of reporting: The last four GAAS concern information you must consider prior to
issuing your audit report:
· You have to state whether the financial statements are prepared using generally accepted
accounting principles (GAAP).
· Just as important is to report whether GAAP are consistently applied for all financial

3. accounting. Should this not be the case, you have to report any departures.
· You also have to make sure that disclosures — any additional information needed to
explain the numbers on the financial statements — are provided.
· Lastly, you have to include your opinion as to whether the financial statements present
fairly in all material respects the financial position of the company under audit.
Operationa Audit: An operational audit is the examination of an operating unit or a complete
organization to evaluateits performance, as measured by management's objectives. The stages of
an operational audit mightbe summarized as definition of purpose, familiarization, preliminary
survey, program development,fieldwork, reporting the findings, and follow-up.
Compliance Auditing:Compliance auditing involves testing and reporting on whether an
organization has complied with therequirements of various laws, regulations, and agreements.
Solution
FUNCTIONS OF AUDIT :-
Following are the most important functions of an audit.
1. Study The Accounting System :-It is the basic function of auditing. In order to determine the
nature, timing and extent of the audit procedures auditor should study the accounting system.
2. Internal Control System :-
It is a process which determines that management policies are carried out according the
accounting principles. This system is very useful to safeguard the interest of the enterprise. The
auditor determines the effectiveness of this system. Our company uses to ensure the proper
accounting principles are followed by doing auditing.
3. Vouching :-
This function is essential to determine the accuracy of accounting record. This checking the
vouchers with supporting documents which support and prove the business transactions. All
entries in books of accounts are made on the basis of relevant vouchers.
4. Verification Of Assets :-
It is the function of auditing that it should verify the assets of the business. It is concerned with
the determination of value, ownership and possession of business asset. The auditor can check
the existence of asset.

4. 5. Legal Requirement :-
It is the function of auditing to verify that statements are prepared under the legal requirements
or not. There are various laws like company andincome tax ordinance which are introduced by
the govt.
6. Liabilities Verification :-
The liabilities of the business can be verified from the books of accounts. The auditor can write
a letter to the creditors for the verification of liabilities. The auditor must receive the certificate
from the management in this regard.
7. Capital And Revenue :-
Auditing should make difference between capital and revenue items. The capital items are
compared to note the financial position of the business. The revenue items are compared to
determine the income. The income and expenses related to many years can be divided in current
and coming year.
8. Valuation Of Liabilities :-
Through auditing value of liabilities can be checked from the books of accounts and other
papers. The auditor can also confirm the value from outside sources. The value of liabilities is
given in the balance sheet by the management but it is the function of auditing which confirms
this value.
9. Valuation Of Assets :-
The management gives the value of assets and auditor can apply the accounting principles to
assess the value of assets. The auditor critically examines and takes help from the expert.
10. Reporting :-
Auditing important function is reporting. Auditor is an independent person and it is his duty to
submit his report in writing. If he is satisfied he can present clean report otherwise he can give
qualified report.
Elements of the Generally Accepted Auditing Standards (GAAS)
The generally accepted auditing standards (GAAS) are the standards you use for auditing private
companies. There are 3 elements of GAAS.
General Standards: The first three GAAS are general standards which address the qualification
of auditor and the minimum standards for your work product:
· As an auditor, you must have both adequate training and proficiency.

5. · You are independent in both fact and appearance.
· You exercise due professional care in performing your auditing tasks
Standards of fieldwork: The next three GAAS govern how you actually do your job:
· Your work is adequately planned, and all assistants are properly supervised.
· You gain an understanding of the client and its environment, including internal controls,
to assess the risk of material misstatement in the financial statements and to plan your audit.
· The evidence you gather during the audit is appropriate and sufficient to evaluate
management’s assertions on the financial statements.
Standards of reporting: The last four GAAS concern information you must consider prior to
issuing your audit report:
· You have to state whether the financial statements are prepared using generally accepted
accounting principles (GAAP).
· Just as important is to report whether GAAP are consistently applied for all financial
accounting. Should this not be the case, you have to report any departures.
· You also have to make sure that disclosures — any additional information needed to
explain the numbers on the financial statements — are provided.
· Lastly, you have to include your opinion as to whether the financial statements present
fairly in all material respects the financial position of the company under audit.
Operationa Audit: An operational audit is the examination of an operating unit or a complete
organization to evaluateits performance, as measured by management's objectives. The stages of
an operational audit mightbe summarized as definition of purpose, familiarization, preliminary
survey, program development,fieldwork, reporting the findings, and follow-up.
Compliance Auditing:Compliance auditing involves testing and reporting on whether an
organization has complied with therequirements of various laws, regulations, and agreements.