2. An effort to find out the fairness
and to establish the reliability or
unreliability of an entity’s financial
statement.
Profit & Loss
Balance Sheet
Cash Flow Statement
Statement of Changes in Owner’s equity
3. “An audit is the independent
examination of, and expresssion of
opinion on, the financial statement of
an enterprise by an appointed auditor
in pursuance of that appointment and
in compliance with any relevant
statutory obligatios.”
4. The extent of audit tasks which are
determined by an auditor for
conducting the audit of a company.
According to AS 1
“ The audit procedures deemed
necessary in the circumstances
to achieve the objective of the
audit.”
5. Factors which determines the scope:
1. Statutory Requirements ( Rules and Regulations
formed by the statute of Country)
2. Proper Planning ( To cover all aspects of entity
relevent to the financial statement)
3. Reasonable Assurance ( financial statement
taken as a whole are free from material misstatement)
4. Proper Evidence ( To check the correctness and
adequacy of accounting records)
6. According to AS 1
“To enable the auditor to express
the opinion whether the financial
statement are prepared, in all
material respects, in accordance
with the identified fianacial
reporting framework.”
7. True and Fair View
Obtain all information necessary
for Audit
B/S, P & L represent true and fair
view
Proper accounting record
Prepare in accordance with the
provision of Company Ordinance
8. Errors and Defalcations
May Audit fail to detect errors and
irregularities
However sound audit procedure
may enable auditor to discover
material irregularities
9. Internal Control
Assist the management in
maintaining an adequate system of
internal control by pin pointing the
weak areas.
Constructive Advice and
Guidelines
Auditor has thorough knowledge
about his client’s business
10. Delegate by
Shareholders
Accepted by
Directors (Management)
11. 1. External Audit:
Compulsary for all registered
Companies
Conducted by the Professional Auditors
Conducted in different timings such as:
Continuous Audit ( Monthly, Quarterly)
Interim Audit ( To declare Interim
Dividends)
Final Audit ( End of the Fiancial Year)
12. 2. Internal Audit
Process of reviewing and appraising
activities pertaining to accounting,
financial and other information.
Conducted by Internal Auditor
Aim to build sound and satisfactory
internal control system
13. 3. Cost Audit
Verification and examination of books of
cost accounts in accordance with cost
accounting standards.
4. Government Audit
To examine the government accounts
under prescribed rules and to suggest to
take remedial actions
14. 5. Proprietory Auditor
To see the justification of cost
expenditures incurred by the company.
6. Management Audit
To reveal the shortcomings or
irregularities in Management for
improving operational profitability.
15. Auditing
1. Concerned with recording,
classifying and communicating
the results.
2. Spade work done by accountant
3. Can not be relied upon
unaudited financial statement
4. Accountant can be Chartered
Accountant
5. Accountant is appointed by
management of a company
1. Concerned with basis for
accounting measurements and
assertions.
2. Finishing touch given by
auditor.
3. Can be relied upon Audited
financial statement
4. Auditor must be Chartered
Accountatn for Public and some
Private Companies.
5. Auditor is appointed by the
shareholders.
16. 1. Fraud Detection
2. Errors Detections
3. Regularity and Vigilance of Staff
4. Imrovement of Internal Control System
5. Legal Obligation
6. Reliance on Audited Accounts by
Outside Parties
7. Reliance on Audited Accounts by
Partners
17. An auditor may detect frauds
in this way, the audit not only
helps the management in
preventing and detecting
frauds but also limits
temptation of employees to
commit frauds.
18. Sound system of audit may
detect material errors and
provide assurance to the
management of the business
regarding accuracy of accounts
and effectiveness of the internal
control system.
19. The staff of the accounts department
become regular and vigilant due to
the conduct of an audit .
They keep the books of accounts up
to-date and correct .
Thus the management can get any
desired information easily from the
accounts department without any
delay.
20. An independent audit of entity’s
accounts may pin point the weak
area of the internal control of the
organization and provide valuable
suggestions to the management for
improving the internal control and
accounting procedure.
21. A business must follow the acts and
ordinance regarding business and it
has been become a regular feature to
have accounts audited by all concerns.
Business managed by CEO, Director
(Shareholders not take active part in
business)
Public Corporations must have
audited.
22. Audited accounts and financial
statements are considered to be the
more reliable for the purpose of
1. Income tax assessments
2. Claim for compensation
3. Raising a loan
4. Proposed sales of business
23. Audited accounts may ensure the
provisions or the partnership agreements
relating the rights and obligations of
partners.
Enable the partners to settle the accounts of
a retiring partner.
Enable an incoming partner to assess the
worth of the firm.
Facilitate the settlement of accounts
between the existing partners and tend to
prevent any future dispute.