define auditing . explain the objectives and limitations of auditing
Answers
Auditing refers to the process of examining and evaluating the financial accounts of a company to make sure that the financial records present the true picture of the financial position of the company and there are no tampering involved.
The main objective of auditing is to determine if the company is maintaining true accounts or if any fraudulent activities are involved in the finances of the company. An outside auditor does the checking and gives a statement regarding the company’s financial statement.
The limitations of the auditing process are:
· The process of auditing is subjective if the auditor is partial towards the company the auditor may overlook some of the mistakes.
· The time given to audit the company’s papers are very limited so the auditor cannot carefully check all the transactions.
· It does not help the company in improving its profits or efficiency and thus companies feel it is a waste of money and time.
· Auditing does not assure complete accuracy.
· Since auditing is done only once a year the company can manipulate and prepare records that aren’t completely true.