What Are The Qualities Of An Auditor – An audit is an examination of the financial position as revealed by the financial statements. This is an examination of the financial statements to determine whether the financial statements give a true and fair view of the company’s financial position and profit or loss. An audit is a conscious and serious check of the accuracy, adequacy and reliability of accounting data and financial statements. The importance of revision
3 An audit is a methodical process for independently verifying a company’s financial information to form an opinion on whether it is true and fair. Here, organization refers to all institutions, regardless of their size, structure, nature and form. An audit is a substantive, impartial investigation of every aspect of a transaction, such as checking coupons, receipts, ledgers and related documents, to confirm the validity and reliability of a financial statement. In addition, a detailed audit can detect errors and fraud in accounts or deliberate manipulation or embezzlement etc. The auditor will verify the accuracy and transparency of financial information, compliance with accounting standards and whether taxes have been paid correctly. After a thorough examination of the accounting books and financial records, he will give his opinion in the form of a report. A true and fair report must be given to the person appointing the auditor. The audit can be carried out internally or externally. The internal audit function is performed by an internal auditor appointed by the organization to improve internal control systems and the accounting system. The external auditor is appointed by the company’s shareholders.
What Are The Qualities Of An Auditor
“An audit is an examination of accounting records to determine whether they accurately and completely reflect the transactions to which they relate.” – L.R.Dicksee “Audit is concerned with the verification of accounting information that determines the accuracy and reliability of accounting. Statements and reports.” – R.K. Mautz “An audit is a systematic examination of financial statements, records, and related operations to determine compliance with generally accepted accounting principles, management policies, and stated requirements.” -R.E. Schlosser Different authors have defined revision differently.
Auditor: Definition, Qualities & Types Of Auditors
The objectives of the audit are classified under two heads: Main/Primary objective Sub/Secondary objectives Main objective: The main objective of the audit is to establish the reliability of the financial position and profit and loss statements. To ensure that the financial statements present a true and fair view of the business and its transactions. To check and determine that the balance sheet on a given date gives a true and fair view of the company’s financial position, and the income statement a true and fair view of the profit or loss for the accounting period. To determine that the financial statements meet the criterion of reliability. Forming an independent assessment and opinion on the reliability and veracity of financial statements and the fairness of financial operations and operating results. Audit objectives
Fraud detection and prevention: An important sub-objective of the audit is fraud detection and prevention. Fraud refers to the intentional misrepresentation of financial information. Fraud can include: tampering with, falsifying or altering records or documents misappropriation of funds. Avoiding the effects of the transaction from documents or Registration of deals without content. Misapplication of accounting policies 2. Detection and prevention of errors: Another important purpose of auditing. An audit ensures that there are no misstatements in the financial statements. Errors can be detected by thoroughly checking and verifying business books, business accounts, vouchers and other important information.
7 Types of Errors A. Clerical Errors: Clerical errors are those resulting from incorrect postings, totals, and balances that post an item to the wrong account. Such errors can be divided into the following categories: (i) Errors due to omission: An error due to omission occurs when a transaction is not fully or partially recorded in the books of accounts. For example, the goods purchased from Narendra Kumar are not recorded anywhere in the books of accounts. (ii) Commission errors: Commission errors occur when certain transactions are wrongly recorded (incorrectly entered) in the books of accounts, e.g. Error writing the amount on the invoice. For example, debiting Premchand’s account with Rs. 100/-
8 b. Fundamental errors: Fundamental errors occur when a transaction is recorded without following basic accounting and bookkeeping principles. For example, if there is a misallocation of expenses or receipts between capital and revenue. C. Compensating Errors/Offsetting Errors:- Compensating errors occur when one error is balanced or any other error can be offset in such a way that the negative (or credit) side of the debit neutralizes the credit (or debit) side of the other . For example, Anil’s account should be debited with Rs. 500, credit for Rs. 500 also Sunil’s account which should be credited by Rs. Debited for Rs.500. Both errors complement each other. D. Duplication Errors Such errors occur when duplicate entries and duplicate entries are made in the original book of entries.
Qualities Required Of An Internal Auditor
9 types of fraud These are intentional errors that aim to misrepresent and not disclose important facts for transactions in the business books. Like 1. Misappropriation of cash: Cash is an asset in a highly leveraged business, a cash audit examines receipts and payments to detect and prevent embezzlement of cash. Cash may be misappropriated, (a) by refusing to deposit cash received; or (b) credit less than is actually received; or (c) false entries on the payment side of the cash book; or (d) an entry on the payment side of the cash book in excess of what was actually paid. 2. Misappropriation of goods: fraudulent demand for goods by those who handle them, e.g. Registering a large purchase that receives a smaller amount and as a personal receipt of the remaining amount. Appropriate ways of keeping purchase and sale accounts, stocks, periodic stock checks will help prevent misappropriation of goods.
10 3. Fraudulent manipulation of accounts / forged vouchers: These are false evidence presented to the auditor during the audit process. This should be determined by the auditor. This type of fraud is very difficult to detect as it is usually committed by directors or managers or other responsible officers. Therefore, the auditor must be very careful in detecting such frauds. He must perform routine checks and balances with great care and perform audits, tact and intelligent inquiries. or 2. by underestimating or overestimating assets and liabilities; or 3. Using hidden reserves during a period when the concern earned little or no profit without disclosing this fact to shareholders. Report to the owners whether the financial statement presents a true and fair view of the company’s financial affairs. Another objective is to detect and prevent fraud and detect and prevent errors.
1. Accounting means the systematic keeping of records of the organization’s financial statements and the preparation of financial statements at the end of the financial year. 2. It is regulated by accounting standards 3. The work performed by accountants 4. Purpose To show the performance, profitability and financial position of the organization. 5. Accounting begins where accounting ends. 6. Periodic accounting is a continuous process, i.e. daily recording of transactions, audit means review of the books and financial statements of the organization. The auditor’s criteria for determining whether a company’s financial statements present a true and fair view. Auditions begin when accounting is completed. Revision is a cyclical process.
12 7. NATURE Deals with final accounts 8. GOAL Determining business results 9. REPORTING The accountant does not provide any report. 10. The status of the Accountant is an employee of the organization. 11. Errors and frauds The accountant may commit errors and frauds. 12. Competence There is no formal qualification relating to the determination of the reliability of the financial statements to verify the accuracy of the financial statements. The auditor submits the prescribed report. The auditor is not an employee of the organization. The auditor cannot commit errors and fraud. Certain qualifications are required.
Auditor Is A Watchdog, Not A Bloodhound”
Time base 1) Interim audit: An audit conducted between two annual audits is considered an interim audit. This can be done quarterly or semi-annually. This may include a full audit of accounts for part of the year. Usually, this audit is done in large companies where there is a large volume of transactions for the audit work. This can also be done to allow the board to announce interim profits
14 2) Period/Final Audit (Year End): This is where the audit work begins
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