Objectives of auditing

Meaning of auditing
Objectives of auditing
Primary objectives
Secondary objectives
Types of errors
Technical errors
Errors of omission
Errors of commission
Duplicating errors
Compensating errors
Errors of principle
Detection and prevention
MCQ

1. OBJECTIVES OF AUDITING Under the guidance of Sundar B . N. Asst. Proff. & course Co-ordinator Post-Graduation studies in commerce G.F.G.C.W. Holenarsipura . 1 Chinthana H . V. 1 st M.Com

2. CONTENT MEANING OBJECTIVES MULTIPLE QUESTIONS 2

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4. MEANING OF AUDITING Auditing is a examination of books of accounts of a company by a qualified individuals to know the truthfulness accuracy and reliability of the accounts and report the same. Auditing is on independent examination examination of financial information of any entity with a view to expressing on opinion there on. 4

5. OBJECTIVES OF AUDITING Primary objectives Secondary objectives Reporting Detection & and prevention of errors Detection & prevention of frauds

6. 1.PRIMARY OBJECTIVES / MAIN OBJECTIVES To express his opinion on “Financial statement” that they reflect true and fair position of a business. Ensure that the books of account have been maintained properly and the summarized a true and correct summary of business transaction. To verify the financial statement trading and profit and loss and balance sheet have been drawn up accordingly. To confirm existence and the values of the assets and liabilities by physical verification. 6

7. 2. SECONDARY OBJECTIVES It is the that the principle or primary objective of audit is the examination of the books of accounts and records so as to report to the owners of the business whether the balance sheet gives a true and fair view of the state of affairs of the business as that the end of the financial year 7

8. 1.DETECTION AND PREVENTION OF ERRORS. Errors refers to on unintentional mistakes made committed by account assistants in writing a books of accounts recording day to day transactions. TYPES OF ERRORS. 8

9. TECHNICAL ERRORS 9 Technical errors Error of commission Duplicating of errors Errors of omission Compensating errors TYPES OF ERRORS

10. a. Errors of omission: Errors commited by omiting to record the transaction on taken place in business it may be complete omission. A transaction has not been recorded in the books of account either wholly. 10

11. B. Errors of commission: When a transaction has been recorded but as been wrongly entered in the Book of original entry or in ledger. For ex: the amount of RS. 232 might be entered as 322 in books of original entry. Such errors can be located while Vouching the transaction with the original invoices. 11

12. C. Duplicating errors. If the same transaction has been recorded twice called “duplicating errors” such errors can be located by conformation slip by debtors. 12

13. D. Compensating errors. Errors accured at a places balancing one another is called compensating errors. Also known ass off setting error, is a type of error which is counter balanced By any other error or errors. 13

14. ERRORS OF PRINCIPLE. Recording to the transaction against the fundamental principles of accounting (GAAP) Generally acceptable accounting principles. When entries are not recorded according to the fundamental principles of accountancy. 14

15. 2. DETECTION AND PREVENTION OF FRAUDS Frauds refer to intentional misstatements or miss descriptions made in the books of Account assistants, with a view to deceive or cheat some body. 15

16. TYPES OF DETECTION & PREVENTION OF FRAUDS Misappropriation of cash Misappropriation of goods Falsification or manipulation of account 16

17. MISAPPROPRIATION OF CASH It means fraudulent appropriation of cash belong in to another person by one to whom it has been. Interested by one who handles it. Related to sales Related to purchase Related to cash receipts Related to cash payment 17

18. MISSAPPROPRIATION OF GOODS: It means the wrong or fraudulent conversion or fraudulent application of goods by those who handle them. Fraudulent manipulation of accounts: Showing on increase profits in the actual profit Methods used to show increase profits Showing a decrease in the actual profit Prevention of errors and frauds 18

19. M C Q 1. Audit means…….. a. Recording business transaction. b. Preparing the final accounts c. Examination of books,accounts,vouchers etc. d. Decision making. Answer: C. Examination of books, accounts, vouchers etc. 19

20. 2. Detection of errors and fraud in audit is… a. Primary object b. Secondary object c. Specific object d. None of these Answer: b. Secondary object 20

21. 3. Goods sent on approval basis have been recorded as credit sales. This is an example of… a. Error of principle b. Error of commission c. Error of omission d. Error of duplication Answer: a. Error of principle 21

22. REFERENCE. Title: Objectives of auditing. Retrieved from : Principles of auditing B. S. Raman. Head of the dept. of commerce 22