TO THE WORLD OF AUDIT .WELCO

Me

Presented by : ROHIN.P.NADAF

Please Check Explanation Video on YouTube which is on last slide.

PRESENTATION ON AUDITING :

Introduction.Definition of audit.Features of auditing. Types of auditingClassification of auditors.Qualities of an auditor.Advantages of audit.Disadvantage of audit.

INDEX:

WHAT IS AUDIT ?

INTRODUCTION :

The term audit is derive from the Latin word “AUDREY” which means to “here”.

Auditing is as old as accounting. The VEDAS contain reference to accounts on auditing. ‘Arthasashthra’ by Kautilya gives detailed rules for accounting and auditing of public finance.

The original objective of auditing was to deduct and prevent errors and frauds.

DEFINATION OF AUDIT : L.R.DICKSEE :

“Auditing is an systematic examination of records of business or other organization, in order to ascertain or verify the facts regarding its financial operation and result therefore”.

FEATURES OF AUDITING :

1. Auditing is a systematic, scientific, examination of the books of accounts and records of a business.

2. Auditing implies physical verification of the assets and liabilities of a business.

3. Auditing or audit examination is made only by an independent person or a body of a persons duly qualified by the purpose.

4. Auditing is undertaken by both business concern and non-business concern.

5. Auditing may be undertaken periodically or throughout the financial period.

TYPES OF AUDIT :ON THE BASIS OF BUSINESS ORGANIZATION

STATUTORY AUDIT

PRIVATE AUDIT

GOVERNMENT AUDIT

BUSINESS ORGANISATION :a) Statutory audit:

Statutory audit means legally compulsory audit. It is provided under the provision of a state or law. It is also known as Annual audit.b) Private audit :

Private audit means the audit which is not compulsory by the act. It is also known as voluntary audit.c) Government audit :

Government audit refers to the audit of government departments, statutory co-operation and government companies.

TYPES OF AUDIT :ON THE BASIS OF BUSINESS ORGANIZATION

STATUTORY AUDIT

PRIVATE AUDIT

GOVERNMENT AUDIT

DEGREE OF INDEPENDENCE:

a) Internal audit :

Internal audit is an independent ,objective assurance and consulting activity designed to add value and improve an organizations operations.

b) External audit :

Refers to the audit of a business concern undertaken by a professional qualified auditor.

CLASSIFICATION OF AUDITORS: INTERNAL AUDITOR EXTERNAL AUDITOR1) Auditor will be appointed by management of the entity.

Appointment of auditor will be made by owners e.g. Shareholders.

2) Scope to be defined by appointing authority. Scope is defined by law.

3) The internal auditor is not entirely independent of the management.

The external auditor is entirely independent of the management.

4) The internal auditor receives salary for working as an employee in the organization.

The external auditor received his fees for his professional services.

5) Report will be submitted to the management. Report will be submitted to owners of entity.

6) The internal auditor fulfills the needs of the management.

The independent or external auditor fulfills the needs of the owners of the business as well as those of law.

QUALITIES OF AUDITOR :1. PROFFESSIONAL QUALITIES 1.Knowledge of Accounting 2.Knowledge of Cost Accounting 3.Knowledge of Management Accounting 4.Knowledge of Techniques of Accounting 5.Knowledge of Tax Laws

2. GENERAL QUALITIES 1.Honesty and Integrity 2.Responsibility 3.Open and Free Mind 4.Confidential 5.Sincere and honest

PROFESSIONAL QUALITIES1) Knowledge of Accounting:- The auditor must possess full knowledge of the conceptual framework of accounting, principles and practices of general accounting etc.

2) Knowledge of Cost Accounting:- He must fairly acquainted with the principles and practices of cost accounting so that he is fully conversant with the various cost concepts such as direct and indirect costs, cost allocation of overhead costs etc.

3) Knowledge of Management Accounting:- He must be fairly acquainted with the principles and practices of management accounting. This knowledge enables him to conduct general audit and management audit.

4) Knowledge of Techniques of Accounting:- He must be a master of various techniques of auditing. He must also keep himself abreast with the changes and developments in the techniques of auditing.

GENERAL QUALITIES 1. Honesty and Integrity:-

The auditor must be a man of high degree of honesty and integrity. He must possess high moral courage.

2.Responsibility:-

The auditor must be a man of great responsibility. Because public confidence in the audit profession arises from high standards of performance and a high sense of responsibility to the public interest on the part of the auditor.

3.Open and Free Mind:-

In course of audit, the auditor must have an open and free mind. When suspicion arises, he must probe the matter thoroughly, calmly and intelligently.

4.Confidential:-

The auditor must not disclose to others any confidential information of his client which he receives during the course of audit.

5.Sincere and Honest:-

The auditor must be sincere and honest in his profession; He must follow professional ethics, customs and regulations properly.

ADVANTAGES OF AUDIT : TRUE AND FAIR VIEW OF BUSINESS TRASACTION.

MORAL CHECK.

DETECTION OF ERRORS AND FRAUDS.

HELPS IN FILING OF RETURNS.

ADVISE AND SUGGESTIONS BY AUDITOR.

DISADVANTAGES OF AUDIT :CORRUPT PRACTICES TO INFLUNCE THE AUDITOR.

CONFLICT WITH OTHERS.

EFFECT OF INFLATION.

NO ASSURANCE.

DEPENDENCE OF OPINION OF OTHERS.