Auditing notes

Unit 1
Meaning and objectives of auditing

What Is Auditing?
Auditing, or a financial audit, is an official examination and verification of a business’s
financial records.

The main goal of auditing is to make sure that a company’s financial statements are
accurate and are following regulatory guidelines. Auditing also gives investors, creditors,
and other stakeholders reasonable assurance that they can rely on a company and its
integrity.

Now, it’s important to note that auditing doesn’t provide a complete guarantee that every
digit recorded in a company’s financial reports is accurate. Auditors work within a specific,
reasonable margin of error known as materiality. The volume of materiality depends on
the size of the company and its reported revenue and expenses.

Definitions of Audit and Auditing

The term auditing/audit has been defined by different authors/entities as under:

• Spicer and Peglar defined audit as:

“Audit is such an examination of the books, accounts and vouchers

of a business, as shall enable the auditor to satisfy himself whether
or not the balance sheet is properly drawn up, so as to exhibit a true
and correct view of the state of the affairs of the business according
to the best of his information and explanations given to him and as
shown by the books; and if not, in what respects it is untrue or
incorrect.”
• Prof. L R Dicksee defined auditing as:

“Auditing is an examination of accounting records undertaken with

a view to establish whether they correctly and completely reflect
the transactions to which they relate.”
• The International auditing practices committee defined auditing as:

“The independent examination of financial information of any entity

whether profit oriented or not and irrespective of size/legal form,
when such an examination is conducted with a view to express an
opinion thereon.”
• The book “An Introduction to Indian Government Accounts and Audit” issued
by the Comptroller and Auditor General of India, defines audit as:

“An instrument of financial control. It acts as a safeguard on behalf

of the proprietor (whether an individual or group of persons)
against extravagance, carelessness or fraud on the part of the
proprietor’s agents or servants in the realization and utilisation of
the money or other assets and it ensures on the proprietor’s behalf
that the accounts maintained truly represent facts and that the
expenditure has been incurred with due regularity and propriety.
The agency employed for this purpose is called an auditor.”

The objectives of auditing generally encompass the following key points:

1. Expression of Opinion: The primary objective of auditing is to express an

opinion on the financial statements. This opinion provides assurance to
stakeholders regarding the accuracy, fairness, and reliability of the financial
information presented.

2. Compliance: Auditing ensures that the financial statements comply with

relevant accounting standards, regulations, and legal requirements. This helps
in maintaining transparency and trust in financial reporting.

3. Detection of Errors and Fraud: Auditors are tasked with identifying errors,
irregularities, or instances of fraud within the financial statements. This
involves examining transactions, internal controls, and other relevant factors
to detect any discrepancies.

4. Evaluation of Internal Controls: Auditing involves assessing the effectiveness

of internal controls implemented by the organization to safeguard assets,
prevent fraud, and ensure accurate financial reporting.

5. Enhancement of Financial Reporting: Through the auditing process,

recommendations may be made to improve financial reporting processes,
internal controls, and overall organizational efficiency.

6. Fair Presentation: Auditing aims to ensure that the financial statements

present a true and fair view of the organization's financial position,
performance, and cash flows. This involves examining the accuracy and
completeness of the information disclosed in the financial statements.
 7. Timeliness: Auditing also focuses on the timeliness of financial reporting.
Auditors assess whether the financial statements are prepared and presented
in a timely manner, allowing stakeholders to make informed decisions based
on up-to-date information.

Types of auditing

1. Internal audit
Internal audits take place within your business. As the business owner,
you initiate the audit while someone else in your business conducts it.

Businesses that have shareholders or board members may use internal

audits as a way to update them on their business’s finances. And,
internal audits are a good way to check in on financial goals.

Although there are many reasons you may conduct an internal audit,
some common reasons include to:

• Propose improvements
• Monitor effectiveness
• Make sure your business is compliant with laws and regulations
• Review and verify financial information
• Evaluate risk management policies and procedures
• Examine operation processes

2. External audit
An external audit is conducted by a third party, such as an accountant,
the IRS, or a tax agency. The external auditor has no connection to your
business (e.g., not an employee). And, external auditors must
follow generally accepted auditing standards (GAAS).

Like internal audits, the main objective of an external audit is to

determine the accuracy of accounting records.

Investors and lenders typically require external audits to ensure the

business’s financial information and data is accurate and fair.
Audit reports

When your business is audited, external auditors usually give you an

audit report. Audit reports include details of the audit process and what
was found. And, the report includes whether your financial records are
accurate, missing information, or inaccurate.

3. IRS tax audit

IRS tax audits are used to assess the accuracy of your company’s filed
tax returns. Tax auditors look for discrepancies in your business’s tax
liabilities to make sure your company did not overpay or underpay
taxes. And tax auditors review possible errors on your small business
tax return.

Auditors usually conduct IRS audits randomly. IRS audits can be

conducted via mail or through in-person interviews.

4. Financial audit
A financial audit is one of the most common types of audit. Most types
of financial audits are external.

During a financial audit, the auditor analyzes the fairness and accuracy
of a business’s financial statements.

Auditors review transactions, procedures, and balances to conduct a

financial audit.
After the audit, the third party usually releases an audit opinion about
your business to lenders, creditors, and investors.

5. Operational audit
Operational audits are similar to internal audits. An operational audit
analyses your company’s goals, planning processes, procedures, and
operation results.

Generally, operational audits are conducted internally. However, an

operational audit can be external.
The goal of an operational audit is to fully evaluate your business’s
operations and determine ways to improve them.

6. Compliance audit
A compliance audit examines your business’s policies and procedures
to see if they comply with internal or external standards.

Compliance audits can help determine whether or not your business is

compliant with paying workers’ compensation or
shareholder distributions. And they can help determine if your business
is compliant with IRS regulations.

7. Information system audit

Information systems audits mostly impact software and IT companies.
Business owners use information system audits to detect issues
relating to software development, data processing, and computer
systems.

This type of audit ensures the system provides accurate information to

users and makes sure unauthorized parties do not have access to
private data.

Also, IT and non-software businesses should regularly conduct mini

cybersecurity audits to ensure their systems are secure from fraud and
hackers.

8. Payroll audit
A payroll audit examines your business’s payroll processes to ensure
they are accurate. When conducting payroll audits, look at different
payroll factors, such as pay rates, wages, tax withholdings, and
employee information.

Payroll audits are typically internal. Conducting internal payroll audits

helps prevent possible external audits in the future.
Businesses should conduct internal payroll audits annually to check for
errors in their payroll processes and remain compliant.

9. Pay audit
Pay audits allow you to identify pay discrepancies among your
employees.

A pay audit can help you spot unequal pay at your company. During a
pay audit, analyse things like disparities due to race, religion, age, and
gender.

Pay audits can also help you ensure workers are paid fairly based on
your business’s industry and location.

Internal audit
What is an Internal Audit?
One of the most searched phrases on this subject is “internal audit
meaning.” So, what is an internal audit or what does it mean? Internal Audit
is a department or organization within a company tasked with providing
unbiased, independent reviews of systems, business organizations, and
processes. The role of an internal audit department is to provide senior
leaders and governing bodies of an organization with an objective source of
information regarding the following:

• The organization’s risks

• Control Environment
• Operational Effectiveness
• Compliance with applicable laws and regulations

What is the Role of Internal Audit?

As Internal Audit reports to senior leadership, it is only appropriate that its
activities are directed by that CEO or Board of Directors through its Audit
Committee. Members of Internal Audit must be independent of internal
politics and unbiased to provide leadership with an objective source of
information. Under the direction of the Audit Committee, Internal Audit
works with management to systematically review control activities over
critical systems and processes.
The reviews performed by Internal Audit are often called internal audits. An
internal audit may be used to assess an organization’s performance or the
execution of a process against a number of standards, policies, metrics, or
regulations. These audits may include examining a business’s internal
controls around corporate governance, accounting, financial reporting, and
IT general controls. Internal audits may also entail evaluating the
effectiveness/efficiency of critical business operations such as supply chain
management. Those individuals working in Internal Audit are called internal
auditors. Internal auditors may cover all areas of an organization or
specialize based on their skill sets.

What is the Purpose of an Internal Audit?

The aim of internal audits is to identify weaknesses within the
organization’s processes and control environment internally so that they
can be fixed as quickly as possible to prevent harm to the organization or
its stakeholders. Accordingly, the internal audit plan for an organization
should be driven on a risk basis or, in other words, be designed to examine
those areas that present the greatest risk to the company. The internal
audit plan should also include a component of the strategic needs of an
organization. Similarly, each internal audit purpose should be aligned with
the audit plan.
Who Performs the Audit?
• Internal Audits – Who conducts internal audits? Internal
auditors, typically employees of the company perform internal
audits. However, companies lacking the competency or
manpower may outsource this to an external entity.
• External Audits – External auditors, typically members of a
CPA firm, perform external audits. External auditors and the
firm they work at must be independent of the company being
audited to maintain objectivity.
Who is the Audit Reported To?
• Internal Audits – Board of Directors, and members of
management
• External Audits – Shareholders and members outside of the
company
Audit program
What is an audit program?
An audit program, also called an audit plan, is an action plan that
documents what procedures an auditor will follow to validate that an
organization is in conformance with compliance regulations.

The goal of an audit program is to create a framework detailed enough for

any outside auditor to understand. It should contain the following
information:

• the official examinations that have been completed;

• conclusions reached; and

• the reasoning behind each conclusion.

Objectives of audit programs

In addition to relevant regulatory compliance mandates, objectives for audit

programs should consider and incorporate the following:

• management priorities

• business intentions

• system requirements

• business structure

• legal and contractual mandates

• customer and other interested parties' expectations

• risk management vulnerabilities

• corrective actions from previous audits

audit notebook
Audit Notebook

Meaning

Audit Notebook is a register maintained by the audit staff to record important

points observed, errors, doubtful queries, explanations and clarifications to be
received from the clients. It also contains definite information regarding the day-
to-day work performed by the audit clerks. In short, audit notebook is usually a
bound note book in which a large variety of matters observed during the course
of audit are recorded. The notebook should be maintained clearly, completely
and systematically. It serves as authentic evidence in support of work done to
protect the auditor against any legal charge initiated against him for negligence.
It is of immense help to the auditor in preparing audit report. It also acts as a
valuable guide for conducting audit for future years.
Example:
Following are the queries made in the
Audit Notebook:
1. Voucher No.75 Paid towards advertisement expenses for Rs. 3,50,000.
2. Voucher No.170 Rent paid Rs. 22,000.
3. Voucher No.98 Material purchased and received in Stores for Rs. 58,375
4. Voucher No.245 Machinery purchased for Rs. 7,28,000.

Contents of Audit Notebook

The following matters should have been incorporated in an Audit Notebook.

1. A list of the account books normally used and maintained.

2. Names of the principal officers, their duties and responsibilities.
3. Nature of business carried on and important documents relating to the
constitution of business like
Memorandum of Association, Articles of Association, Partnership deed etc.,
4. Extracts of minutes and contracts affecting the accounts.
5. Extracts of correspondence with statutory authorities.
6. Copy of audit programme.
7. Accounting methods, internal control and internal check system in operation.
8. Routine queries like missing receipts and vouchers etc.
9. Details of errors and frauds discovered during the course of audit.
10. Points to be included in audit report.

Routine checking and test checking for skill

development
1. Routine Checking:

• Definition: Routine checking, also known as compliance testing or

substantive testing, involves examining a sample of transactions or
documents to ensure they comply with established procedures or
policies. It focuses on verifying whether transactions are recorded
accurately and in accordance with generally accepted accounting
principles (GAAP) or other relevant standards.
• Process: Auditors select a sample of transactions or documents and
review them systematically. They may examine supporting documents
such as invoices, receipts, bank statements, and contracts to confirm
their accuracy and compliance with organizational policies and legal
requirements.
• Purpose: Routine checking helps auditors detect errors, irregularities,
or instances of non-compliance with established procedures. It
provides assurance that transactions are properly recorded and
reported in the financial statements.

Features of routine checking

1. Systematic Sampling: Routine checking involves examining a systematic
sample of transactions or documents to ensure compliance with established
procedures or policies. The sample may be selected randomly or based on
predefined criteria, such as transaction type or time period.
 2. Compliance Focus: Routine checking primarily focuses on verifying
compliance with organizational policies, procedures, and regulatory
requirements. It ensures that transactions are recorded accurately and in
accordance with generally accepted accounting principles (GAAP) or other
relevant standards.

3. General Review: Auditors review the selected sample of transactions or

documents to ensure they are properly recorded, authorized, and
documented. This may involve checking for proper approvals, documentation
of transactions, and adherence to internal controls.

4. Detection of Errors and Irregularities: Routine checking helps auditors

detect errors, irregularities, or instances of non-compliance with established
procedures. By systematically reviewing transactions, auditors can identify
discrepancies or deviations from expected norms.

5. Preventive Controls Evaluation: Routine checking also evaluates the

effectiveness of preventive controls within the organization. By ensuring
compliance with established procedures, auditors assess the adequacy of
internal controls in preventing errors and fraud.

explain routine checking and test checking in auditing

In auditing, routine checking and test checking are two methods used by auditors to gather
evidence and assess the reliability of financial information. Here's an explanation of each:

1. Routine Checking:

• Definition: Routine checking, also known as compliance testing or substantive

testing, involves examining a sample of transactions or documents to ensure they
comply with established procedures or policies. It focuses on verifying whether
transactions are recorded accurately and in accordance with generally accepted
accounting principles (GAAP) or other relevant standards.
• Process: Auditors select a sample of transactions or documents and review them
systematically. They may examine supporting documents such as invoices,
receipts, bank statements, and contracts to confirm their accuracy and
compliance with organizational policies and legal requirements.
• Purpose: Routine checking helps auditors detect errors, irregularities, or instances
of non-compliance with established procedures. It provides assurance that
transactions are properly recorded and reported in the financial statements.
 2. Test Checking:

• Definition: Test checking, also referred to as substantive testing or sampling,

involves examining a sample of transactions or account balances to assess the
accuracy and completeness of financial information. Unlike routine checking, test
checking does not focus on verifying compliance with procedures but aims to
obtain evidence about the fairness of financial statements.
• Process: Auditors select a representative sample of transactions or account
balances and perform detailed testing on them. This testing may involve verifying
the existence, accuracy, valuation, and completeness of items in the financial
statements. Auditors may use various techniques such as analytical procedures,
confirmation with third parties, and physical inspection of assets.
• Purpose: Test checking helps auditors evaluate the risk of material misstatement
in the financial statements. By testing a sample of transactions or balances,
auditors can assess whether the financial information is fairly presented and
identify any discrepancies or errors that may require further investigation.

Features of test checking

1. Selective Sampling: Test checking involves selecting a sample of transactions
or account balances for detailed examination. The sample is typically chosen
based on risk assessment factors, such as the materiality of the accounts or
the likelihood of errors or fraud.

2. Substantive Focus: Test checking primarily focuses on substantiating the

accuracy, completeness, and validity of financial information presented in the
financial statements. It aims to provide assurance on the fairness of the
financial statements by examining specific transactions or account balances.

3. Detailed Examination: Auditors conduct detailed testing on the selected

sample, which may include verifying the existence, accuracy, valuation, and
completeness of items. This often involves performing analytical procedures,
confirming balances with third parties, and physically inspecting assets or
documents.

4. Risk Assessment: Test checking helps auditors assess the risk of material
misstatement in the financial statements. By testing a sample of transactions
or balances, auditors can identify areas of potential risk and determine the
appropriate level of further audit procedures.

5. Materiality Consideration: Test checking is often focused on material

transactions or balances, as identified through materiality assessment.
Auditors prioritize their testing efforts on items that have the greatest impact
on the financial statements' users.
 Unit 2
Internal control

Definition and purposes of internal control

The Turnbull Report, first published in 1999, defined internal control and its scope as
follows:

‘The policies, processes, tasks, behaviours and other aspects of an organisation that
taken together:

Facilitate effective operation by enabling it to respond in an appropriate manner to

significant business, operational, financial, compliance and other risks to achieve its
objectives. This includes safeguarding of assets and ensuring that liabilities are
identified and managed.

Ensure the quality of internal and external reporting, which in turn requires the
maintenance of proper records and processes that generate a flow of timely, relevant
and reliable information from both internal and external sources.

Ensure compliance with applicable laws and regulations and also with internal
policies.’

Turnbull’s explanation focuses on the positive role that internal control has to play in
an organisation. Facilitating efficient operations implies improvement, and, properly
applied, internal control processes add value to an organisation by considering
outcomes against original plans and then proposing ways in which they might be
addressed.

At the same time, Turnbull also conceded that there is no such thing as a perfect
internal control system, as all organisations operate in a dynamic environment: just
as some risks recede into insignificance, new risks will emerge, some of which will
be difficult or impossible to anticipate. The purpose of any control system should
therefore be to provide reasonable assurance that the organisation can meet its
objectives.

Objectives of internal control

Internal control should have the following objectives:

Efficient conduct of business:

Controls should be in place to ensure that processes flow smoothly and operations
are free from disruptions. This mitigates against the risk of inefficiencies and threats
to the creation of value in the organisation.

Safeguarding assets:
Controls should be in place to ensure that assets are deployed for their proper
purposes, and are not vulnerable to misuse or theft. A comprehensive approach to
his objective should consider all assets, including both tangible and intangible
assets.

Preventing and detecting fraud and other unlawful acts:

Even small businesses with simple organisation structures may fall victim to these
violations, but as organisations increase in size and complexity, the nature of
fraudulent practices becomes more diverse, and controls must be capable of
addressing these.

Completeness and accuracy of financial records:

An organisation cannot produce accurate financial statements if its financial records
are unreliable. Systems should be capable of recording transactions so that the
nature of business transacted is properly reflected in the financial accounts.

Timely preparation of financial statements:

Organisations should be able to fulfil their legal obligations to submit their account,
accurately and on time. They also have a duty to their shareholders to produce
meaningful statements. Internal controls may also be applied to management
accounting processes, which are necessary for effective strategic planning, decision
taking and monitoring of organisational performance.
Audit procedure
What are Audit Procedures?
Audit procedures are the techniques, processes, and methods that auditors use to
obtain reliable audit evidence, which enables them to gain a sound judgment about
an organization’s financial status. Audit procedures are conducted to help determine
whether or not a company’s financial statement is credible and factual. The regular
implementation of these procedures helps establish a business’s financial reputation
and strengthen its trustworthiness in the eyes of its customers, the market, and
potential investors.

Audit Procedure Methods

There is no definitive structure when it comes to auditing; its whole process would
depend on the auditor, the company to be audited, and the purpose of the audit.
Learn more about the two main methods of audit procedures below:

What are the Types of Audit Procedures?

Inquiry

One of the simplest types of audit procedures is inquiry. This procedure involves
auditors collecting verbal evidence through formal or informal inquiry from the people
in the organization. Although relevant, this type of evidence isn’t strong enough to
stand alone and would need other supporting documents or proofs to be considered
valid.

Confirmation

Similar to inquiry, confirmation also asks for explanations regarding the transactions
of an organization. The main difference, however, is that auditors would validate
them through direct communication with a third party or other external sources that
an organization has relationships with. Examples of these third parties are banks,
suppliers, or customers.

Observation

With this type of audit process, auditors usually try to confirm that existing business
procedures or measures are being implemented by the organization. This type of
procedure gives auditors an idea on how internal processes work, and if they can
affect the operations of the organization as a whole.

Inspection of documents

Inspection of documents is the process of gathering and examining transactions

through recorded information. This can be performed using two ways—vouching and
tracing.
Vouching is where auditors manually check the details of supporting documents to
verify the transaction records. Meanwhile, tracing is the process of validating
transactions by tracking their connections to the source document.

Inspection of physical or tangible assets

Inspection of tangible assets is the procedure where auditors physically examine the
company’s assets including properties such as land, building, vehicles, equipment,
or inventory. This process doesn’t only confirm the existence of the asset, but also
helps in determining whether it suffered defects or impairment, which affect its value.

Auditors can make a list of all the fixed assets of a company or use this asset
register checklist for the inspection.

Recalculation

This audit process is fairly straightforward. In recalculation, auditors recompute the

transactions themselves and compare them to the initial financial statement or
calculation of the company. Auditors can then identify if they are balanced, or further
investigate if there are any differences or discrepancies found.

Reperformance

Reperformance is simply just auditors independently repeating the audit procedures

or internal controls the company has also performed. Audit evidence obtained using
this procedure is considered more reliable than evidence indirectly gathered,
because it’s a first-hand experience and direct form of evaluation.

Auditors can always perform their audits using multiple procedures. For example,
aside from just checking supporting documents, they can also inspect physical
assets or ask other related third parties for confirmation of existing transactions. By
performing various audit procedures, auditors can strengthen the credibility of the
audit result and reduce the chance of miscalculations and discrepancies.

Meaning and types of vouching

In mobile.
Verification of assets and liability
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 Unit 3

Appointment powers and duties and liability of an

auditor

1. Introduction:
Every public company and every private company being a subsidiary
of a public company is required to have the annual account and
balance sheet audited by the auditor. the articles of association
usually provide for the appointment of auditors and a periodical
audit of accounts.
2. Meaning:
Black's Law Dictionary:
A person of a firm usually an accountant or an accounting firm,
formally examines an individual's or entity's financial records or
status.
3. Importance:
The role of the auditor is of great importance. he must not be
influenced directly or indirectly by others in discharging his duties.
He must prepare to hear arguments and decide on logical grounds.
he should possess sound techniques of audit.
4. Appointment of auditors:
I. By directors:
The first auditor of the company must be appointed by the directors
within sixty days of incorporation.
II. General meeting:
If directors do not appoint the auditors, the company in general
meetings may appoint the first auditor.
III. By commission:
If the auditor is not appointed by the general meeting or directors
of the company, the commission may appoint an auditor upon the
application of any person.
5. Number of auditors:
A company may have an auditor or more auditors.
7. Qualification for the appointment of auditor:
a). In the case of public company:
In the case of a public company, a person can be appointed and can
act as an auditor. if he is a charted accountant.
(b) In the case of a private company:
In the case of a private company, a qualified auditor is not
necessary
9. Powers of auditor:
Every auditor of a company has a right of access at all times to the
books, papers, accounts, and vouchers of the company. He is
entitled to require from the directors and officers of the company
such information and explanation as may be necessary for the
performance of his duties as an auditor. He is entitled to attend any
general meeting of the company.
10. Duties of auditor:
The following are the duties of an auditor:
Duty to acquaint:
He must make himself acquainted with his duties under the articles
and the companies ordinance 1984.
Duty to be honest:
He must be honest with the company.
Duty to take care:
He must take reasonable care. he is further justified in trusting the
servants of the company provided he uses reasonable care.
Duty not to interfere in business:
He is not bound to advise on the running of the business and he
should not concern with how the business is being carried on.
Inspection of books:
He must see that the books show the true financial position of the
company.
Duty to make a report:
He must make a report on all material points of accounts.
Duty to inquire:
If anything, suspicious occurs he is bound to go deep into it.
11. Liabilities of an auditor:
Liabilities of on auditor are as follows:

• If the auditor knowingly and wilfully fails he shall be

punishable with fine and other penalties as provided in this
ordinance.

• If on account of the report of the auditor’s negligence any

damage results to the company the auditor is liable.

• Any breach of duty causing loss to the company

misfeasance proceeding may be instituted against him.

• If in any report, wilfully makes a statement false he shall be

liable to be punished with imprisonment of either
description not exceeding three years and also a fine.

Auditors report and audit certificate

What is an audit report? An audit report is the ultimate product of every audit. It
is nothing but a statement that combines all the observations made by an auditor
while reviewing a company’s financial statements. Through the medium of an
audit report, an auditor accumulates the results of his audit and conveys his
opinion on the financial statements of the client. Thus, it’s an indispensable part
of audit without which the auditing process can’t complete. Also, law via
Section 143(2), (3), & (4) of the Companies Act, 2013 mandates that an audit
report duly signed by the auditor must be furnished & laid down before the
members at the annual general meeting of the company.
This audit report is a reflection of an auditor’s viewpoint on the real state of
affairs of the company whose accounts have been examined by him. Since it
reads an auditor’s opinion on a company’s records, it is highly used by different
stakeholders and investors as a reliable source of information to assess the
financial conditions of the company.

Structure of audit report is in mobile

What is an audit certificate?

Sometimes besides the issuance of an audit report for general purposes, an
auditor is often called upon to issue a certificate for a specific purpose. The
word certificate refers to a written affirmation of the truth of the facts
mentioned in the document and does not include any estimate or opinion. In an
auditing context, an audit certificate is a written confirmation given by a
professional accountant as regards the accuracy of a specific matter stated
therein. This is not an opinion on all of the books of account of a client
pertaining to a full year, rather it’s only an affirmation issued to verify a
particular matter as desired by the client. Auditors should ensure that such a
certificate is issued on their letterhead or on stationary carrying their name and
address to avoid any misunderstanding. Further, an auditor should maintain that
the certificate is issued in accordance with the company’s request and is given
only for a specific purpose or for submission to any particular/specific authority.
The same should not be given to any other authority or used for any other
purpose without prior permission in writing.

Example of an audit certificate

An auditor may be called upon to issue a certificate in many circumstances. For

example, to certify the claim of GST refunds in excess of Rs. 2 lacs, a certificate
from a cost accountant/chartered accountant is to be submitted along with the
application for refund in Form GST RFD 01. Similarly, when a company
applies for obtaining the status of a dormant company in Form MSC-1, it needs
to attach an auditor’s certificate along with the application and also a statement
of affairs duly certified by a chartered accountant (or auditors) of the company.
Therefore, there are numerous instances where a company might need a
certification from an auditor be it to certify its annual turnover, or for capital
infusion, or for any purpose whatsoever as may be prescribed in different laws.
Sample Audit Certificate A certificate format for GST refund under Rule
89(2)(m) of the CGST Rules, 2017

This certificate is to confirm that in respect of the refund that is amounting to

Rupees ——- (in words) claimed by M/s ————- (the Applicant’s Name),
having GSTIN/ Temporary ID ———– for the tax period (fiscal year) —— —–
, the incidence of tax, interest, or any other amount as claimed as refund, has not
been passed on to any other person. This attestation is based on the examination
of the books of account and other relevant records, returns, and particulars
maintained/ furnished by the applicant.

Signature of the Chartered Accountant/ Cost Accountant:

Name:

Membership Number:

Place:

Date

Comparison table of differences

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 Unit 4

Audit of banking companies

Introduction

The audit of Banks is made compulsory under the enactments

governing the Banks. “Banking is such a unique industry where you
do not want your competitor to fail.” Banks and Financial
Institutions (FIs) play a central role in the economy. They hold
savings of public provide a means of payment for goods & services,
finance the development of business and trade.

Therefore, Banks and FIs must command the confidence of the

public and those with whom they do business. Thus stability of the
banking and financial systems, both nationally and internationally,
recognized as a matter of general public interest.

Additional risk factors for Bank /FI audit

o Custody of large amount of monetary items

o Assets that can rapidly change in value

o Operate with high leverage (capital to assets)

o Short term deposit, solvency, and liquidity issue

o Complex accounting and IT systems

o Assume significant commitments

o Wide spread of branches and departments

o Highly regulated with strict enforcement

o Cross border involvement and FX issue