Introduction of Audit

INTRODUCTION TO
AUDIT
SYLLABUS
Unit 1: Introduction to Audit

Unit 2: Company Audit
Unit 3: Bank Audit
Unit 4 : Insurance Audit
UNIT 1
 Introduction: Meaning, Objects, Basic
Principles and Techniques. Classification of
Audit, Audit Planning. Internal Control,
Internal Check and Internal Audit, Audit
Procedure – Vouching and verification of
Assets & Liabilities. Special Areas of Audit:
Special features of Cost audit. Tax audit and
Management audit. Recent Trends in
Auditing: Basic considerations of audit in EDP
Environment.
HOW AUDIT WORKS
 Vouchers/ Supporting Document
 Accounting Entries
 Journal entries
 Ledger/ subsidiary book
 Trial balance
 Financial Statement
 Audit
 Supporting document
 Vouching / Verification
ACCOUNTING CYCLE
Account
Financial Managemen Cost

Accounting t Accounting Accounting
AUDIT OBJECTIVE
To detect errors and Fraud.
The objective of an audit is to express an

opinion on financial statements, to give the
opinion about the financial statements,
the auditor examines the financial statements
to satisfy himself about the truth and fairness
of the financial position and operating results
of the enterprise
WHAT IS AUDIT ?
 The term audit is derived from the Latin
term ‘audire,’ which means to hear. In early
days an auditor used to listen to the accounts
read over by an accountant in order to check
them
https://www.youtube.com/watch?v=pkKO9ZNy
OIc&list=TLPQMDYwNzIwMjDw2WIC5FFgSg&ind
ex=2
DEFINITION
Prof. L.R.Dicksee “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.
As per definition given by ICAI: - Audit is
systematic, Independent, Examination of
financial records, irrespective of legal form,
whether profit oriented with objective to
give opinion, whether financial statements
true & fair view.
INDEPENDENT
An independent auditor is a chartered
accountant (CA) who examines the financial
records and business transactions of a company
with which he is not affiliated. An independent
auditor is typically used to avoid conflicts of
interest and to ensure the integrity of
performing an audit.
DIFFERENT FORM OF ORGANIZATION
Organization
Non- profit Profit
Sole Partnership
Public Private Company
proprietor firm
TRUE AND FAIR VIEW
1. Management should apply and select proper
Accounting Policies.
2. Management should apply all the
accounting standard.
3. Adequate disclosure in note to accounts.
ACCOUNTING POLICIES
 Accounting policies are the
specific principles and
procedures implemented by a
company's management team
that are used to prepare
its financial statements. These
include any accounting
methods, measurement
systems, and procedures for
presenting disclosures.
Accounting policies differ
from accounting principles in
that the principles are the
accounting rules and the policies
are a company's way of adhering
to those rules.
ACCOUNTING STANDARDS
History of AS
https://
www.yourarticlelibrary.
com/accounting/
accounting-standards/
indian-accounting-
standards-history-and-
accounting-standards-
asb/68186
NOTES TO ACCOUNT
Also known notes to
financial
statements, footnotes
, notes to accounts
are supporting
information that is
usually provided along
with a
company’s final
accounts or financial
statements.
IMPORTANCE OF AUDIT
 True and Fair Balance sheet

 True and Fair Profit and loss account
 As per the legal requirements
 Disclose all the material fact
 As per standards of accounting and Auditing practice.
 Moral check on the employees
 Tally with the books of accounts
 Detection of errors and fraud
 Facilitates Taxation
 Loans from Bank or any investors.
LIMITATION OF AUDIT
Sampling
Audit sampling is the application of
an audit procedure to less than 100 percent of
the items within an account balance or class of
transactions for the purpose of evaluating
some characteristic of the balance or class.
This section provides guidance for planning,
performing, and evaluating audit samples.
AUDIT PROCEDURE
Audit
Audit Opinion
Audit
Evidence
Audit
Procedure
Substantive Procedure Compliance Procedure
Vouching and Internal

verification Control
Analysis of
key Financial
Ratio
ANALYSIS OF KEY FINANCIAL RATIO
 Going Concern
 Current Ratio
AUDIT OPINION
Opinion
Clear Qualified Adverse Disclaimer

report Report Report of opinion
INTERNAL CONTROL, INTERNAL
CHECK AND INTERNAL AUDIT
Internal Control: Internal Control can be
defined as a system designed, introduced and
maintained by the company’s management and
top-level executives, to provide a substantial
degree of assurance in achieving business
objective, while complying with the policies
and laws, safeguarding the assets, maintaining
efficiency and effectiveness in regular
operations and reliability of financial
statements.
https://www.youtube.com/watch?v=ErB5bwjVsY0
INTERNAL CONTROL SALES
INTERNAL CHECK
Internal Check : Internal Check is an integral
function of the internal control system. It is an
arrangement of duties of the staff members in
such a way that the work performed by one
person is automatically and
independently checked by the other.
INTERNAL AUDIT
A team of experts reviews the procedures and
operations of an organization and reports it to
the management in cases such as non-
compliance, lack of control and inefficiency,
especially in big organizations where thousands
of employees work and the business operations
take place from various locations. The internal
audit team not only requires expertise in
accounting but also in organizational behavior
and functional areas of management.
VOUCHING AND VERIFICATION
 Vouching: Lawrence Dicksee had defined
vouching as an act of “comparing entries in the
books of accounts with documentary evidence in
support thereof”.
 Verification: It means confirmation or proving the
truth about the assets and liabilities appearing in
the balance sheet.
VOUCHER/SUPPORTING DOCUMENT
TRUE AND FAIR
1. Occurrence
2. Amount
3. Relevant Entries
4. As per Standards
5. As per Law
6. Disclosure
ACCOUNTING STANDARDS
First Stage:
ICAI Recommends the Standard of Accounting
Second Stage:
SA shall be examine by NFRA ( National
Financial Reporting Authority) . NFRA may also
make its own recommendation.
Third Stage:
Central Government examines the
recommendations made by NFRA. Then CG may
prescribes, after consultation with NFRA the
Accounting Standard.

Introduction of Audit

Uploaded by

Copyright:

Available Formats

Introduction of Audit

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Introduction of Audit

Uploaded by

Copyright:

Available Formats

INTRODUCTION TO

Unit 1: Introduction to Audit

Financial Managemen Cost

The objective of an audit is to express an

Non- profit Profit

 True and Fair Balance sheet

Substantive Procedure Compliance Procedure

Vouching and Internal

Clear Qualified Adverse Disclaimer

You might also like