Auditing: A Practical Approach” is a comprehensive guide to auditing, covering the fundamental principles and practices of auditing. The book is written in a clear and concise manner, making it an excellent resource for students and practitioners alike.
The development of modern accountancy and the growth of auditing profession in India and, indeed, in the world as a whole must be seen in the context of the enormous expansion of industry, trade and commerce which has taken place in the last decade. The auditing profession is now going beyond the duties prescribed by the Companies Act. It is initiating its own accounting standards, and auditing regulations and guidelines. At present, it has sought to standardize the accounting procedure by issuing mandatory accounting standards and also issuing standardized auditing guidelines for conducting audit work. In addition to that, auditing in its modern form has adopted a multidimensional approach. At present, the scope of auditing is not restricted.
Economic decisions in every society must be based upon the
information available at the time the decision is made. For example, the
decision of a bank to make a loan to a business is based upon previous
financial relationships with that business, the financial condition of the
company as reflected by its financial statements and other factors.
If decisions are to be consistent with the intention of the decision
makers, the information used in the decision process must be reliable.
Unreliable information can cause inefficient use of resources to the
detriment of the society and to the decision makers themselves. In the
lending decision example, assume that the barfly makes the loan on the
basis of misleading financial statements and the borrower Company is
ultimately unable to repay. As a result the bank has lost both the principal
and the interest. In addition, another company that could have used the
funds effectively was deprived of the money.
As a means of overcoming the problem of unreliable information,
the decision-maker must develop a method of assuring him that the
information is sufficiently reliable for these decisions. In doing this he must
weigh the cost of obtaining more reliable information against the expected
benefits.
common way to obtain such reliable information is to have some
type of verification (audit) performed by independent persons. The
audited information is then used in the decision making process on the
assumption that it is reasonably complete, accurate and unbiased.
The object is to find out whether balance sheet and profit and
loss account exhibit a true and fair view of business. It usually covers one accounting year. It usually covers one accounting year. It may be conducted at the end of the year.