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LUBS3550 - Introduction To Audit | Assignment

   

Added on  2020-02-24

10 Pages2392 Words109 Views
By student name ProfessorUniversityDate: 27 August 2017.

1ContentsQuestion no 1..............................................................................2Question no 2..............................................................................6Question no 3..............................................................................8Refrences....................................................................................101 | P a g e

2Question no 1Audit of the entity may be defined as an independent examination of the books of accounts ofan entity, whether profit making or not, small or big, government or private, prepared by themanagement. It is using accounting policies and procedures and making use of the estimates andjudgements with the view to express and opinion on the financials, whether it is showing the correctview and has been prepared on an unbiased basis. This activity post the closing of the books gives areasonable assurance to both the internal and external users of the financial statements, a certainty andconfidence on the figures quoted. Auditors may use diverse procedures during the audit of an entitydepending on the nature of the entity like for a manufacturing concern, emphasis would be on theproduction areas, sales, purchases of raw material, for a software entity, the emphasis would be on themanpower costs and subcontracting costs, etc. For this, they may use both the substantive andcompliance audit procedures, besides checking compliance with the regulatory and reporting normsprescribed by Accounting board and IFRS committee. Substantive audit procedures include the checkingthe recording of the incomes and expenses in the books with the respective evidences, invoices, bills,delivery challans, whether they are properly dated and signed and stamped, whether appropriate taxhas been calculate and paid on it. Furthermore, it also includes within it ambit the verification of theassets and liabilities recorded in the statement of affairs. This includes checking the basis on whichrespective assets have been recorded, the basis on which the provision is accounted for, etc. This ismainly performed with the objective of determining and confirming that whatever has been recorded inthe books materially exists and a false representation or the window dressing has not been done. In caseany discrepancies are noted upfront, these are brought to the notice of the management and properjustification is asked for. All the substantive audit procedures are done with the methods includinginspection of books of accounts and calculations, observation of the records, external confirmation to betaken from the debtors, creditors, banks, etc., inquiry from the external parties, recalculation andreperformance of significant adjustments, etc. All these substantive procedures are mainly aimed atgetting the comfortability on the five basic assertions i.e., completeness, rights, existence, valuation andexistence of the assets and liabilities[ CITATION DeZ16 \l 1033 ]. If the materiality of the errors is found to be more, the auditor has to increase the extent of theaudit procedures and apply further checking through the use of analytical audit procedures whichgenerally include analysis of key financial ratios, comparison of the actual from the expected and thebudgeted figures, variance analysis, etc . Besides this, the auditor also takes note of the internal control2 | P a g e

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