• Independent examination - implies the judgement of a person is not subordinate to the
wishes or direction of another person who might have engaged him.
• Financial information - The financial statements and accounts of the entity
• Any entity - whether profit oriented or not and irrespective of its size or legal form. It could
be firm, LLP Company etc.
• Opinion thereon (objective) - Auditing gives a reasonable assurance that the financial
statements are prepared properly, and they are not misleading.
The person conducting this task should take care to ensure that financial statements would not
mislead anybody. This he can do honestly by satisfying himself that:
▪ the accounts have been drawn up with reference to entries in the books of account
▪ the entries in the books of account are adequately supported by sufficient and appropriate
evidence
▪ none of the entries in the books of account has been omitted in the process of compilation
and nothing which is not in the books of account has found place in the statements
▪ the information conveyed by the statements is clear and unambiguous
▪ the financial statement amounts are properly classified, described and disclosed in
conformity with accounting standards; and
▪ the statement of accounts presents a true and fair picture of the operational results and
of the assets and liabilities.
Auditing is interdisciplinary in nature.
• It draws from diverse subjects including accountancy, law, behavioural science, statistics,
economics and financial management and makes use of these subjects.
Auditing and Accounting: Auditing reviews the financial statements which are
nothing but a result of the overall accounting process.
Auditing and Law: An auditor should have a good knowledge of business laws
affecting the entity.
Auditing and Economics: Auditor is expected to be familiar with the overall economic
environment of the client.
Auditing and Behavioural Science: Knowledge of human behaviour is essential
for an auditor to effectively discharge his duties.
Auditing and Statistics & Mathematics: Auditor is also expected to have the knowledge of
statistical sampling for meaningful conclusions and mathematics for verification of inventories.
Auditing and Data Processing: EDP auditing in itself is developing as a discipline in itself.
Auditing and Financial Management : Auditor is expected to have knowledge about various
financial techniques such as working capital management, funds flow, ratio analysis, capital
budgeting etc.
Auditing and Production: Good auditor is one who understands the client and his business
functions such as production, cost system, marketing etc.
22 сен 2024
