Chapter-2
Q. Differentiate between Auditing and Accounting.
Ans: Differentiate between Auditing and Accounting
is giving below --.
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Subject
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Accounting
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Auditing
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1. Define
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Accounting is the process
of recording classifying and summarization of economic event in a logical
manner for the purpose of providing financial information for decision
making.
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Auditing is the systemic
examination of books and records of a business or others organization in
order to verify or and report upon the facts.
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2.Fucation
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To provide certain type of
quantitative information.
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To verify whether recorded
information are properly reflects or not.
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3. Auditing
qualification
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The person must be expert
in accounting.
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The audition must have passed
CA course.
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4. Starting point
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Function of accounting
arises before auditing.
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Function of audition
arising after accounting.
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5.Responsibility
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Accounting is responsibility
to the management.
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Auditing is responsibility
to the shareholders.
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6. Legal status
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Accounts are the person is
employee.
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Auditing may be external or
internal.
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Q. Write down the advantage of financial audit.
Ans: The advantage of financial audit are
discussed below –
(a) Form the
view point of institution /Organization
1.
Proper account
2.
Detection of
fraud and error
3.
Obtaing a clear
picture of organization
4.
Easy to borrowing
5.
Increase goodwill
6.
Decrease in
misunderstanding
7.
Taxation Settlement.
1) From the
view point of owner :
1.
To settle claim
2.
Tax determination
3.
To disburse loan
4.
Settlement of
case
5.
Increase in
reliability
6.
Advantage of
government
Q. Write down the disadvantage or limitation of
financial audit.
Ans: Financial audit also
have some limitation these are describe bellow-
(a) Uncertainty
of select errors: The errors of financial statement can not be
detected by financial audit.
(b) Exact audit
is not possible: Exact of on organization May not possible though this
financial auditing system.
(c) Unreality of principles: The
appropriate audit may not possible if there is any unreality of principle.
(d) Lack of expert auditor : An audit
system may be erroneous for lack of expert auditor.
(e)
May not fulfill the objectives:
If there is any
wrong in the audit system then it may not fulfill the objectives.
So, these are the limitation of
financial audit for which the purpose of audit may not fulfill.
Q. What is GAAS? What are the principles of GAAS?
The most widely recognized
auditing standers associated with public accounting profession are known as the
generally accepted auditing slandered (GAAS).
These standards wore originally approved by
the member of the AICPA in the late 1940
They have since been
incorporated into the statements on auditing on auditing standards.
The principles has been
divided into three parts .These are described below –
1.
General standard:
a. The audit is the be performed by persons having educate,
technical, training and proficiency as or auditing.
b. The auditing should be independent in mental attitude
in relation to the assignment.
c. The auditing must have due profession core in the
planning and preparation of the report.
2. Standard of field work:
a) The work is to be adequately planned and assistants,
if any are to be properly supervised.
b) A sufficient understanding the internal control is to
be obtains to plan the auditing and extents of tests to be performed.
c) Sufficient competent evidential matter to also obtain
through inspection, observation enquires and confirmation.
3. Standard of reporting:
a. The report of financial statement shall state in
accordance with GAAP.
b. The report shall identify those cirmecmstances in such
principles have not been consistently observe in the current period in relation
to the proceeding period.
c. Information disclosures in the financial statement are
to be regarded as reasonable adequate.
d. The report shall contain expression of opinion
regarding the financial statement.
Q. What is SAS?
Ans:
SAS means statement of auditing
standards are issued by the auditing standard board and are consider
interpretations of GAAS.
The SAS receive their authority from AICPA’ S
code of professional conduct.
Q. What is auditors report?
Ans: The auditors report is
the main product or output of the audit .The audit report communicates the
auditors finding to the users of the financial statement.
The audit report is also knows as the audit
opinion and evaluating sufficient competent evidence concerning the fair
presentation on management in the financial statement.
A
report is a statement of all collected and considered facts ,so drawn up to
give clear and concise information to persons who are not already in possession
of the full facts of all subject matters of the report.
Q. What are the basic elements of auditor’s
reports?
Ans:
Auditors report is the fundamental output of
audit .The basis element of auditors report are as follows
1.
Title
2.
Address of the
report
3.
Identification of
financial statement audited
4.
A reference to
the auditing standards
5.
Expression or
disclaimer of opinion or the financial statement
6.
Signature
7.
Auditors address
8.
The Date of
report.
Q. What is audit committee? What are the requirements
of audit committee?
Ans: Audit committee is the subcommittee of the
board of directors that is responsible for the financial responding and
disclosure procedure
The requirement of audit committee and
give below.
1.
Each member of
audit committee shall be the member of board of directors.
2.
The audit
committee is directly responsible for the appointment, compensation of work of
any register of public accountant firm employed by the company.
3.
The audit
committee must approve all audit and non audit services provided by its
auditors.
4.
The audit
committee must establish some procedure received by the company.
5.
Each audit
committee member must have the authority to engage in independent council.
Q. Describe the qualification of good report.
Ans: A good
reports is the report that contains the essential information based on which
the auditor will express his opinion .The qualification of good report are
stated below –
1.
It should be
based on factual information.
2.
It should be
convincing
3.
It should be
forceful
4.
It should be
unbiased
5.
It should point
out mistake
6.
It should be
constructive criticism and not be reprimanding tone.
7.
It should be
constructive and timely suggestions to the management.
8.
It should be
brief.
Q. What is internal auditor? Write down the function
of internal auditor.
Ans: Auditor
employed by individual, companies, partnership .government agencies and other
entitles are called internal auditor.
The
function of internal auditor given below.
1. Internal auditor may conduct financial internal control,
compliance, operation and forensic audit within their organization.
2. They may assist the external auditor with the annual financial
statement audit.
3. They also engage in assurance and consulting for their
entitles.
Q. Discuss the main type of audit?
Mainly
three types of audit.
1. Financila statement audit:
Financial
statement audit is examination of financial statement to opinion on the truth
and fairness of financial condition and operating result of auditors.
2.
Operational audit:
Operational
audit is the review of operation of an entity .It is generally carried out by
internal audit.
3. Compliance audit:
Compliance
audit is a review of an organization recodes performed to determination whether
the organization is following specific
procedures, rules or regulation or regulation by some higher authority.
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