Wednesday, 14 September 2011

Explain the nature and scope of audit and how the scope is determined

The term "Scope of Audit" means the audit procedure which is considered necessary for the achievement of desired objectives. The auditor should keep in view the following points :

1. Legal Conditions :-
While determining the scope of audit and auditor should follow the rules and regulations applicable on the audit work.

2. Validity Of Data :-
The auditor should use various methods to test the validity of data. He should confirm that data provided in the financial statement is reliable.

3. Cover All The Aspects :-
The auditor should cover all the functions of business, know all its working any aspect related to financial statement may not be ignored. A business is small or large auditor should cover all the areas.

4. Comparison :-
The auditor can compare the accounts record with the financial statement to know the true picture. He determines whether the relevant information is properly communicated or not.

5. Apply His Skill :-
While preparing the report, an auditor should apply his professional skill and experience to prove that figures and facts.

6. Sufficient Record :-
The auditor checks that record and relevant data is sufficient. He also uses other tests and verification procedure.

7. Judgement :-
The auditor also considers the judgement of the management made in preparing the financial statements. The auditor must have the quality of judgement when he fails to find the data in the books of account.

8. Internal Check :-
It is not possible for the auditor to check each and every voucher and transaction, so he should try to rely on internal check system. He is also bond to make guess work on the basis of available data.

9. Persuasive Evidence :-
The auditor his opinion as true fair instead of cent percent correct because the available evidence is persuasive. The personal judgement also affect the value of any items.

10. Misstatement Problem :-
Due to the limitations of audit sometimes some material misstatements remain undiscovered. So statement do not show the exact view of operations.

11. Clear The Doubts :-
If the auditor smells any fraud, he should check cent percent items and clear his doubts. He should extend the procedure to confirm his doubts.

12. Opinion Of Auditor :-
If auditor is satisfied about financial information of business then he can express the unqualified opinion otherwise he will express qualified opinion.


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