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Scope Of Audit

In ancient period, there was limited scope of audit because there was no development of

business. Generally, auditor used to check cash transactions if there were suspected

frauds. But in the recent years, scope of audit has increased. Now-a-days auditing is

related to the examination of books of account, evidence, bills, stock and its physicalverification etc.

Now-a-days, it is not possible to go through the books of account. o, an auditor appliestest check. But such test is possible in such organi!ation where effective internal check

system is applied. "n auditor should analyse the suspected frauds so as to find out the

fact but an auditor should depend on the information provided by the concerned officer.

"n auditor should prepare and present report after the examination of profit and lossaccount and balance sheet. "uditor does not only check the books of account on the basis

of evidence but also has to check the authenticity of documents. "n auditor should set his

mind in that area where he is not satisfied with the records. #espite having above facts,attention of audit can be set up as follows$

i. %hecking of books of accounts so as to find out the truth and fairness.ii. &erification of assets and liabilities after its detail checking.iii. %hecking of books of accounts on the basis of available evidence.

iv. %hecking arithmetical accuracy of books of accounts.

v. 'xpressing independent opinion about the financial statements.

vi. (reparing and presenting fair report to the concerned officer or owners.

Objectives Of Audit

Basic ob)ective of auditing is to prove true and fairness of results presented by profit andloss account and financial position presented by balance sheet. Its ob)ectives are

classified into two groups which are given below$

A. Primary Objectives Of Audit

*he main ob)ectives of audit are known as primary ob)ectives of audit. *hey are as

follows$

i. 'xamining the system of internal check.ii. %hecking arithmetical accuracy of books of accounts, verifying posting, costing,

balancing etc.

iii. &erifying the authenticity and validity of transactions.iv. %hecking the proper distinction of capital and revenue nature of transactions.

v. %onfirming the existence and value of assets and liabilities.

vi. &erifying whether all the statutory re+uirements are fulfilled or not.vii. (roving true and fairness of operating results presented by income statement andfinancial position presented by balance sheet.

B. Subsidiary Objectives Of Audit

*hese are such ob)ectives which are set up to help in attaining primary ob)ectives. *hey

are as follows$

i. #etection and prevention of errors

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'rrors are those mistakes which are committed due to carelessness or negligence or lack

of knowledge or without having vested interest. 'rrors may be committed without or with

any vested interest. o, they are to be checked carefully. 'rrors are of various types.ome of them are$

'rrors of principle

'rrors of omission 'rrors of commission

%ompensating errors

ii. #etection and prevention of frauds

rauds are those mistakes which are committed knowingly with some vested interest on

the direction of top level management. anagement commits frauds to deceive tax, to

show the effectiveness of management, to get more commission, to sell share in themarket or to maintain market price of share etc. #etection of fraud is the main )ob of an

auditor. uch frauds are as follows$

isappropriation of cash

isappropriation of goods anipulation of accounts or falsification of accounts without any misappropriation

iii. /nder or over valuation of stock

Normally such frauds are committed by the top level executives of the business. o, the

explanation given to the auditor also remains false. o, an auditor should detect suchfrauds using skill, knowledge and facts.

iv. 0ther ob)ectives

*o provide information to income tax authority. *o satisfy the provision of company "ct.

*o have moral effect