Page 13 - DCOM204_AUDITING_THEORY

Unit 1: Introduction to Auditing

business unit. The scope of the internal audit is fixed by the mutual consent of the auditor Notes
and the management of the unit under audit.

5. Remuneration: Remuneration of the statutory auditor is fixed by the appointing authority,
i.e. in case of first auditors, the auditors the directors fix the remuneration in case of the
subsequent auditors the company in its general meeting fixes the remuneration. In case of
internal auditor the management who appoints him fixes his remuneration.
6. Report: The statutory auditor submits his report to the shareholder of the company in its
general meeting. The internal auditor submits his report to the management of the
company who is also his appointing authority.
7. Removal: The procedure of removal of the statutory auditor is very complex. Only the
company in the general meeting can remove the auditor. It also has to take the permission
of the Central Government. The management of the entity can remove internal auditor.
An audit is a detailed examination of records, frequently financial in nature, in a search for
existing errors or inaccuracies. Audits are typically related to tax records, and the Internal
Revenue Service frequently conducts them to find inconsistencies in income and tax findings.
Companies also conduct audits to make sure their bookkeeping operations are correct and
funds are not missing. While audits can be useful, they are not perfect and correcting audit errors
can be a time-consuming process.

Notes Always keep business expenses and personal expenses entirely separate to make
for easier tax returns and financial reporting. Keep copies of all your business records and
have receipts and statements for any expenses or tax deductions that you claim.
Instructions

1. Create copies of any files or paperwork that can prove the audit information is incorrect.
Always keep the originals, but the copies will be needed to prove your claim.
2. Hire an accountant who can look over your evidence and verify that your figures are
correct. He can then compare it to the audit results and help your draft up a report reporting
the discrepancies.
3. Notify the auditing firm in writing of the audit mistakes and include the copies of your
records that verify your report. Your account’s report should also be included. If this is a
tax audit, your accountant can assist you in refilling your tax returns that point out the
discrepancies of the audit.

1.8 Objectives of Audit

For a better understanding we could classify the objective of audit as:

1.8.1 Primary Objectives

To determine and judge the reliability of the financial statement and the supporting accounting
records of a particular financial period is the main purpose of the audit. As per the Indian
Companies Act, 1956 it is mandatory for the organizations to appoint a auditor who, after the
examination and verification of the books of account, disclose his opinion that whether the

LOVELY PROFESSIONAL UNIVERSITY 7