0What is Audit?
It can be said that auditing is the process by which a competent independent individual collects and evaluates evidence to form an opinion and communicates his opinion to the person interested, through his audit report.
The dictionary meaning of audit is official examination of accounts. Obviously a person who examines the accounts must be a person who knows what to examine, how to examine and to whom his examination reports/observations are to be submitted.
From the above it is clear that the auditing process involves the following components:—
- Books of account
- Auditor
- Auditing process/procedure
Books of account :Books of account are prepared by the entity in accordance with the Generally Accepted Accounting Principles (GAAP) and Accounting Standards and related laws.
Auditor : Auditors in India are practicing Chartered Accountants (CA), who are competent to conduct the auditing.
Auditing process/procedure : In India the Institute of Chartered Accountants of India (ICAI) issues the auditing procedures/practices and these are called Standards on Auditing (SA) previously known as Standard Auditing Practices (SAP / AAS).
What are Standards On Auditing (SAs/AAS)?
SAs (AAS) are the benchmarks by which the quality of audit performance can be measured and the achievement of objective can be documented. By using standards an auditor can determine the professional qualities necessary for effective audit performance. In simple words SAs (AAS) are Auditing Standards, which prescribe the way the auditing should be conducted.
In today’s changing economic scenario, the rapid developments are taking place in the field of auditing. It is requirement of professionals and auditor to discharge his duties using the accounting standards and Standard on Auditing guidance notes issued by The Institute of chartered accountant of India It is also duty of auditor to conclude his function considering amendments in various provision of laws applicable to that organization..
Contemporary Auditing (Auditing Today)
Auditors have an important role in society. Investors, creditors, employers and other sectors of the business community, as well as the government and the public at large rely on the Auditors for sound financial accounting and reporting. The attitude and behaviour of Chartered Accountants in providing such services have an impact on the economic well- being of their community and country. Professional accountants can remain in this advantageous position only by continuing to provide the public with these unique services at a level which demonstrates that the public confidence is firmly founded.
Need Of Auditing
Financial statement shows result of an organisation during a period what position of assets and liability on a given date. Now problem arises for reliability of financial statement. Reliability of financial statements is possible with the help of auditing.
A financial statement which is not audited may express a wrong result and decision taken on the basis of that result will be wrong, but if books of accounts audited by auditor then result will be good.
For example: A financial statement shows loss in books but in fact there is profit the management decided to change the policy or discontinue such business activities but if books are audited then such type decision may not be taken.
It is auditing which ensures that the accounting statements are authentic. In today’s economic environment, information and accountability have assumed a larger role than ever before. As a result, the independent audit of an entity‘s financial statement is vital service to investors, creditors and other participants in economic change.
