Page 40 - DCOM204_AUDITING_THEORY

Auditing Theory

Notes 2. To perform compliance test. The auditor may use a number of transactions, testing the
control in depth at each stage. Such tests will provide him with evidence as to whether or
not he may rely upon that control in planning later audit work.
3. To provide evidence of a substantive nature. He may use such principles to check that
transactions have been properly recorded in the accounting records or in the financial
statements.

2.10 Audited Statement of Accounts

The annual statement of accounts is prepared in accordance with the requirements of the Local
Government (Scotland) Act, 1973. The statement of accounts presents the financial position and
performance of the Council and its related bodies. From 2010/2011 the main elements of the
statements are:
1. Movement in Reserves Statement
2. Comprehensive Income and Expenditure Statement
3. Balance Sheet

4. Cash Flow Statement
5. Notes to the Financial Statements
6. Housing Revenue Account

7. Council Tax Income Account
8. Non-domestic Rates Income Account
9. Common Good Fund
10. Remuneration Report

Self Assessment

Fill in the blanks:

13. Except for.................. , no auditor may be removed before the expiration of the period of
appointment without the previous approval of the Government.
14. Every company with a total sales turnover or gross receipts over ` 4 million must have its
accounts audited in accordance with the .....................
15. .................... audit is carried out only upon specific order of the government.
16. The amount and type of auditing evidence considered varies considerably based on the
.................... and ........................

2.11 Summary

There are numerous provisions incorporated in the Companies Act, 1956 stipulating the
norms and rules to be followed in maintaining the accounts of the company.
All companies are statutorily required to prepare and maintain accounts which are then
scrutinized by the auditor who certify their correctness.

For company accounts to be credible they must be true and fair and this is more likely to
happen if someone competent and independent of the company has vetted the accounts.

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