(1)
|
B. Com. Part-I (Hons.), 2006
1.
AUDITING, 2006
Define Auditing. Discuss its main objectives. (अंकेक्षण की परिभाषा दीजिए
प्रमुख उद्देश्यों का वर्णन कीजिए ।) in english
Answers
Answer:
Auditing is the process of inspecting the books of accounts to authenticate their accuracy and reliability. It is an important process to the company itself, the government, the investors, creditors, shareholder etc. They all rely on audited accounts to make important decisions.
Primary Objectives of Audit
The main objectives of the audit are known as the primary objectives of the audit. They are as follows:
1. Examining the system of internal check.
2. Checking arithmetical accuracy of books of accounts, verifying posting, casting, balancing, etc.
3. Verifying the authenticity and validity of transactions.
4. Checking the proper distinction between capital and revenue nature of transactions.
5. Confirming the existence and value of assets and liabilities.
Verifying whether all the statutory requirements are fulfilled or not.
Proving true and fairness of operating results presented by income statement and financial position presented by the balance sheet.
Subsidiary Objectives of Audit
These are such objectives that are set up to help in attaining primary objectives. They are as follows:
Detection and prevention of errors
Errors are those mistakes that are committed due to carelessness or negligence or lack of knowledge or without having vested interest.
Errors may be committed without or with any vested interest.
So, they are to be checked carefully. Errors are of various types. Some of them are:
Errors of principle.
Errors of omission.
Errors of commission.
Compensating errors.
Detection and prevention of frauds
Frauds are those mistakes that are committed knowingly with some vested interest in the direction of top-level management.
Management commits frauds to deceive tax, to show the effectiveness of management, to get more commission, to sell a share in the market or to maintain the market price of share, etc.
Detection of fraud is the main job of an auditor.
Such frauds are as follows:
Misappropriation of cash.
Misappropriation of goods.
Manipulation of accounts or falsification of accounts without any misappropriation.
Under-or over-valuation of stock
Normally such frauds are committed by the top-level executives of the business. So, the explanation is given to the auditor also remains false.
So, an auditor should detect such frauds using skill, knowledge, and facts.
Other objectives
To provide information to the income-tax authority.
To satisfies the provisions of the Companies Act.
To have a moral effect.