ASPECTS TO BE COVERED IN AUDIT

The principal aspect to be covered in an audit concerning final statements of account are the following:

  •  An examination of the system of accounting and internal control to ascertain whether it is appropriate for the business and helps in properly recording all transactions. This is followed by such tests and enquiries as are considered necessary to ascertain whether the system is in actual operation. These steps are necessary to form an opinion as to whether reliance can be placed on the records as a basis for the preparation of final statements of account.
  •  Reviewing the system and procedures to find out whether they are adequate and comprehensive and incidentally whether material inadequacies and weaknesses exist to allow frauds and errors going unnoticed.
  •  Checking of the arithmetical accuracy of the books of account by the verification of postings, balances, etc.
  •  Verification of the authenticity and validity of transaction entered into by making an examination of the entries in the books of accounts with the relevant supporting documents.
  • Ascertaining that a proper distinction has been made between items of capital and of revenue nature and that the amounts of various items of income and expenditure adjusted in the accounts corresponding to the accounting period.
  • Comparison of the balance sheet and profit and loss account or other statements with the underlying record in order to see that they are in accordance therewith.
  • Verification of the title, existence and value of the assets appearing in the balance sheet.
  • Verification of the liabilities stated in the balance sheet.
  •  Checking the result shown by the profit and loss and to see whether the results shown are true and fair.
  •  Where audit is of a corporate body, confirming that the statutory requirements have been complied with.
  •  Reporting to the appropriate person/body whether the statements of account examined do reveal
    a true and fair view of the state of affairs and of the profit and loss of the organisation.

It will thus be realised that the duties are not limited to the verification of the arithmetical accuracy of the books of account kept by his client; he must also satisfy himself that entries in the books are true and contain a complete record of all the transactions of the business and these are recorded in such a manner that their real nature is revealed. On that account, he must examine all vouchers, invoices, minutes of directors or partners correspondence and other documentary evidence that is available to establish the nature and authenticity of the transactions. Besides, he must verify that there exists a proper authority in respect of each transaction; that each transaction is correctly recorded, etc. Finally, he must verify that the form in which the final accounts are drawn up is the one prescribed by law or is the one that ordinarily would present a true and fair picture of state of affairs of the business.

(Visited 67 times, 1 visits today)
Share this: