J.R. Batliboi, a renowned authority on accounting and auditing defines auditing as :
"An intelligent and a critical scrutiny of the books of accounts of a business with the documents and vouchers from which they are writtenup , for the purpose of ascertaining whether the working result for a particular peiod', as shown by the profit & loss account, as also the exact financial condition of that business, as reflected in the balance sheet are truely determined and presented by those responsible for their compilation".
Scope of Auditing
The increased complexity of modern trade and commerce as greatly widened the scope of the auditors's operations and calls for a high degree skills & experience.
In this connection, the following major auditing development of 20th century are worthnoting.
# the change of objective from the deduction of fraud to determination of fairness of financial statement.
# The responsibility of the auditor for the income statement as wellas the balance sheet.
# Increased responsibility of the auditor to "Third parties" such as goverment agencies, stock exchanges, and investing public numbering lakhs of people.
# Changes of auditing method from detailed examination of individual transaction to use sample techniques.
# recoginition of the need to evaluate the system of internal control a guide to the direction and amount of testing and sampling to be performed.
# The development of new auditing procedure applicable to electronic data processing and use of computer as an audit tool.
Thus, it would be absorve the scope of the auditor as undergone radical change. the extent to which the auditor should carry out his examination would vary from firm to firm and industry to industry and will to a very large extent depend upon the individual fact and circumstances of the each case.
AAs 8 governs the standard of auditing respecting audit planning.
The audit plan should cover the following areas:
1) Clear fixings of what the audit engagement is about , what the objective & scope of the audit are.
2) Gaining knowledge of client's business.
3) Gaining knowledge of clients' internal control system.
4) Consideration of laws governing the entity of the client.
5) Consideration as to initial engagement.
6) Obtaining of terms of engagement.
7) Planning for nature and extent of audit procedures, audit programming & scheduling.
8) Man power planning & quality control plan.
9) Coordinating the works to be performed by the others.
10) Documentation.
Types of Audit
1) Based on theorganisation 2)Based on conduct of audit.
structure of the business.
a) Statutory audit. a) continuous audit.
b) private audit. b) periodical audit.
c) government audit. c) balance sheet audit.
d) internal audit. d) complete audit.
e) partial audit.
f) interim audit.
g) In-depth audit
h) Cost audit.
i) Management audit
Internal audit:
IT is a continuous and systematic process of examining and reporting the operation and record of a concern by his employees selected specially of this purposes. It is one of the function of management.
Standard audit:
This embraces a complete check and analysis of certain items and contigent upon effective internal check, appropriate test check on remaining items, the whole of the work being in accord with general auditing standards quite adequate to justify an unqualified opinion.
Occasional audit:
This type of audit is conducted once a while whenever the needs rises and the client desires is to be carried out. this is possible only in case of proprietor concerns such as sole trader's business or a partnership business.
