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Unit 9: Audit of Limited Companies

10. Ask for a copy of the audited balance sheet and auditor’s report of the company for the Notes
previous year.
11. Advise the company to complete the accounting records, balance the books prepare the
final accounts, arrange the vouchers serially, and prepare schedules of different categories
of debtors and creditors.

12. Identify the events and transactions likely to have a significant effect on the financial
statements of the company.
13. Design the nature and extent of audit tests appropriate to the company.

Although the exact manner of conducting audit largely depends upon the size and nature of the
company, a systematic approach is essential to achieve the audit objectives. Moreover, the
different aspects of audit work are closely interrelated. Hence, it is useful to distinguish between
the essential phases through which the audit work proceeds and progresses in the company.

9.2.3 Role of Company

At the time of commencement of audit, the company must also be ready to extend its cooperation
to the auditor. Besides other arrangement, the company’s approach to audit should be on the
following lines:
1. Keep a correct record-of the day-to-day transactions of the business.

2. Maintain documentary and other, evidences in support of the transactions in proper
sequence to facilitate their audit reference.
3. Obtain bank statements periodically and reconcile them with the cash records of the
company.
4. Compile a list of debtors and creditors of different categories showing the amount in
respect of each.
5. Record all important decisions pertaining to financial matters, preferably in the form of
resolutions.
6. Arrange all relevant communications issued or received by the company affecting’
accounting records.

7. Provide necessary information and explanations which may be required by the auditor in
course of his preliminary evaluation.
8. Prepare supplementary statements or additional reports relating to significant transactions
as a basis to information to the auditor.

Notes The effectiveness and promptness of audit is virtually a joint responsibility of the
company and its auditor.

Their mutual cooperation and understanding, therefore, help the process of audit.

Self Assessment

Fill in the blanks:
4. A letter of engagement is a ……………………… of acceptance of offer made by the company.

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