Nothing Special   »   [go: up one dir, main page]
Scribd Logo
Upload

Welcome to Scribd!

  • 13 views

    CG Assignment #05 31466

    Uploaded by

    Sheiry
    The document discusses the duties and responsibilities of auditors. It notes that an auditor's main duties are to verify that financial statements have been prepared based on the underlying accounting records and present a true and fair view of the company's financial position. The responsibilities of auditors include forming an opinion on whether financial statements comply with accounting standards and disclose all relevant information. If misstatements are found, auditors must determine if they are due to fraud and communicate this to management and regulatory authorities if necessary. Auditors are also responsible for ensuring opening balances are accurate and prior period misstatements that affect the current period are properly disclosed.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    CG Assignment #05 31466

    Uploaded by

    Sheiry
    13 views6 pages
    The document discusses the duties and responsibilities of auditors. It notes that an auditor's main duties are to verify that financial statements have been prepared based on the underlying accounting records and present a true and fair view of the company's financial position. The responsibilities of auditors include forming an opinion on whether financial statements comply with accounting standards and disclose all relevant information. If misstatements are found, auditors must determine if they are due to fraud and communicate this to management and regulatory authorities if necessary. Auditors are also responsible for ensuring opening balances are accurate and prior period misstatements that affect the current period are properly disclosed.

    Copyright

    © © All Rights Reserved

    Available Formats

    PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    The document discusses the duties and responsibilities of auditors. It notes that an auditor's main duties are to verify that financial statements have been prepared based on the underlying accounting records and present a true and fair view of the company's financial position. The responsibilities of auditors include forming an opinion on whether financial statements comply with accounting standards and disclose all relevant information. If misstatements are found, auditors must determine if they are due to fraud and communicate this to management and regulatory authorities if necessary. Auditors are also responsible for ensuring opening balances are accurate and prior period misstatements that affect the current period are properly disclosed.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    13 views6 pages

    CG Assignment #05 31466

    Uploaded by

    Sheiry
    The document discusses the duties and responsibilities of auditors. It notes that an auditor's main duties are to verify that financial statements have been prepared based on the underlying accounting records and present a true and fair view of the company's financial position. The responsibilities of auditors include forming an opinion on whether financial statements comply with accounting standards and disclose all relevant information. If misstatements are found, auditors must determine if they are due to fraud and communicate this to management and regulatory authorities if necessary. Auditors are also responsible for ensuring opening balances are accurate and prior period misstatements that affect the current period are properly disclosed.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 6

    Department of Management Sciences, National University of Modern

    Languages Multan Campus

    Assignment
    Submitted by:
    Shahraz Mushadi
    Roll NO: 31466
    Subject: CG
    Submitted to: Sir Dr. Rao Akmal
    Class: MBA (3.5)6th Evening
    Date: 16-04-2021
    Q#01: Define the function of auditing. What are the types of audit?
    Answer: The Institute of Chartered Accountants of India (ICAI) has defined audit as,
    “The independent examination of any entity, whether profit oriented or not and
    irrespective of its size or legal form, when such an examination is conducted with a
    view to expressing an opinion thereon”.
    As per Standard Auditing Practices (2) of the Institute of the Chartered Accountants
    of India: “The objective of an audit of financial statements is to enable an auditor
    to express an opinion on financial statements which are prepared within a
    framework of recognized accounting policies and practices and relevant statutory
    requirements.”
    We can identify three types of audits, namely,
    1. Financial statement audit: An audit of financial statements is conducted to
    determine whether the overall financial statements are stated in accordance
    with specified criteria. The financial statements commonly audited are
    balance sheet, the income statement, the cash flow statement and the
    statement of stockholders’ responsibility.
    2. Compliance audit: The purpose of compliance audit is to determine whether
    the auditee is following specific procedures, rules or regulations set down by
    some higher competent authority.
    3. Operational audit: An operational audit is a review of any part of an
    organization’s operating procedures and methods for the purpose of
    evaluating effectiveness and efficiency.

    Q#02: Who is an auditor? Discuss the different types of auditors.


    Answer: An auditor is defined as a person appointed by a company to perform an
    audit. He is required to certify that the accounts produced by his client companies
    have been prepared in accordance with normal accounting standards and represent
    a true and fair view of the company. Usually, chartered accountants are appointed
    as auditors. An auditor is a representative of the shareholders, forming a link
    between government agencies, stockholders, investors and creditors.
    Types of auditors:
    1. Internal auditors: Internal auditors are employed by the organization for
    which they perform audits. Their responsibilities vary and may include
    financial statement audits, compliance audits and operational audits. They
    may assist the external auditors in completing the financial statement audit
    or perform audits for use by management within the entity. Internal auditors
    must have no operating involvement in activities they audit. An organization
    may have a small or very large internal audit staff. They cannot be
    independent as long as the employeremployee relationship exists.
    Independence is often accomplished by giving the highest ranking person in
    internal auditing the status of vice president and having that person report
    directly to a committee of the board of directors.
    2. Independent auditors: Independent auditors are usually referred to as CPA
    (Certified Public Accountants) firms. The opinion of an independent auditor
    about financial statements makes the statements more credible to such users
    as investors, bankers, labor unions, government agencies and the general
    public.
    3. Government auditors: Government auditors work in various local, state and
    federal or central government agencies performing financial, compliance and
    operational audits. Local and state governments, for example, employ
    auditors to verify that businesses collect and remit sales taxes and excise
    duties as required by law.

    Q#03: What are the duties of an auditor? Also explain the responsibilities of
    auditors with regard to the misstatement of financial statements.
    Answer:
    Duties of an Auditor
    The duties of an auditor are defined under Section 227 (1A) of the Companies Act
    1956. It says that an auditor can enquire6
    • Whether loans and advances made by the company on the basis of security
    have been properly secured.
    • Whether transactions of the company which are represented merely by book
    entries are not prejudicial to the interests of the company.
    • Where the company is not an investment company within the meaning of
    Section 372 or a banking company, whether so much of the assets of the
    company as consist of shares, debentures and other securities have been sold
    at a price less than that at which they were purchased by the company.
    • Whether loans and advances made by the company have been shown as
    deposits.
    • Whether personal expenses have been charged to revenue account in other
    words, the auditor is responsible for.
    • Verifying that the statements of accounts are drawn up on the basis of the
    books of business.
    • Verifying that the statements of accounts drawn up on the basis of the books
    exhibit a true and fair state of affairs of the business.
    • Confirming that the management has not exceeded the financial/
    administrative powers vested in it by the Articles of Association of the
    Company and/or resolutions of shareholders.
    Responsibilities of Auditors
    The Institute of Chartered Accountants of India (ICAI) has issued the Standard
    Auditing Practices and Auditing and Accounting Standards with emphasis on
    effective auditing practices. It talks about the integrity, objectivity, independence,
    confidentiality and responsibility of an Auditor.7 As per the Standard Auditing
    Practices (2), an auditor has the following responsibilities:
    • He is responsible for forming and expressing his opinion on the financial
    statements. He assesses the reliability and sufficiency of the information
    contained in the underlying accounting records and other source data by
    making a study and evaluation of accounting systems and internal controls.
    • He determines whether the relevant information is properly disclosed in the
    financial statements by comparing the financial statements with the
    underlying accounting records and other source data to see whether they
    properly summaries the transactions and events recorded.
    • He has to ensure that his work involves exercise of judgment, e.g., in deciding
    the extent of audit procedures and in assessing the reasonableness of the
    judgments and estimates made by management in preparing the financial
    statements.
    • He is not expected to perform duties which fall outside the scope of his
    competence, e.g the professional skill required of an auditor does not include
    that of a technical expert for determining physical condition of certain assets.
    Responsibilities Regarding the Misstatement of Financial Statements
    With regard to the responsibility of an auditor concerning misstatements, the
    position is as follows: If appropriate disclosures regarding the material
    misstatement affecting the prior period financial statements is not made, then the
    auditor should issue a modified report on the current period financials modified with
    respect to the corresponding figures included. Moreover, when the prior period
    financial statements are not audited, the incoming auditor should state in the
    auditor’s report that the corresponding figures are unaudited. The auditor should
    obtain sufficient appropriate audit evidence that the closing balances of the
    preceding period have been correctly brought forward to the current period and the
    opening balances do not contain misstatements that materially affect the financial
    statements for the current period.
    When the auditor has determined that a misstatement is, or may be, the result of
    fraud, the auditor evaluates the implications, especially those dealing with the
    organizational position of the person or persons involved.
    For example, fraud involving misappropriations of cash from a small petty cash fund
    is ordinarily of little significance to the auditor in assessing the risk of material
    misstatement due to fraud. This is because both the manner of operating the fund
    and its size tend to establish a limit on the amount of potential loss, and the
    custodianship of such funds is ordinarily entrusted to an employee with a low level
    of authority. Conversely, when the matter involves management with a higher level
    of authority, even though the amount itself is not material to the financial
    statement, it may be indicative of a more pervasive problem. In such circumstances,
    the auditor reconsiders the reliability of evidence previously obtained since there
    may be doubts about the completeness and truthfulness of representations made
    and about the genuineness of accounting records and documentation. The auditor
    also considers the possibility of collusion involving employees, management or third
    parties when reconsidering the reliability of evidence.
    The auditor is also responsible to communicate that information (misstatement
    resulting from fraud) to management, those charged with governance and, in some
    circumstances, when so required by the laws and regulations, to regulatory and
    enforcement authorities also. The auditor should communicate these matters to the
    appropriate level of management on a timely basis, and consider the need to report
    such matters to those charged with governance.

    You might also like