Monday, 19 September 2011

Explain the procedure which the auditor should adopt before commencing the new audit and also discuss those instructions which must be given by the auditor

An auditor should pay proper attention to the following points before taking up a new audit :

1. Appointment Letter :-
An auditor should confirm his appointment letter first of all. In this regard he should get and examine the copy of resolution passed by the shareholders in the general meeting.

2. Nature Of Audit :-
Auditor should know about the nature of audit. If he does not know the nature of audit then he can not prepare himself for that audit.

3. List Of Books :-
He should obtain a list of all the books of account which are in the use of business.

4. Names Of Officers :-
The auditor should take the list of all the officers with their names duties and powers. He should also get their specimen signatures.

5. Documents :-
He should also get the copy of memorandum and articles of association. He should study them carefully and check that company is running the business according to them or not.

6. Prospectus :-
The auditor should examine the prospectus to know the relevant matters affecting the accounts.

7. Accountancy System :-
The system of accounting which is employed by client must be examined by the auditor before taking the new audit.

8. Minute Book :-
The auditor should get the minute book and read it carefully. He should also take the notes of important decision made by the directors and shareholders in the various meetings.

9. Internal Control System :-
Internal control system prevailing in the business must be studied by the auditor. He should examine the record and observe the actual procedure in operation.

10. Personal Visit Of Site :-
The auditor should visit the site of the business personally and he should know maximum about the technical nature of the business.

11. Study Of Contracts :-
The auditor should study all those contracts which are made by the company with the outsiders and with employees. He should note down the important mailers.

12. Case Of Joint Auditors :-
If there are more than one auditors and they have decided to audit the company jointly in that situation they should divide the work among themselves and then start the auditing.

13. Previous Report Inspection In Case Of Old Company :-
If the company not a new but old, in this situation auditor should also inspect the report of previous auditor.

14. Audit Programme :-
The auditor may chalk out the audit programme keeping in view above points.

15. Timing :-
Auditor should fix the time of audit before starting the new audit. He should also decide the time for the completion of audit work.

16. Legal Formalities :-
Auditor should also check that legal formalities have been completed by the management or not.

17. Historical Background :-
Auditor must know business history like nature of business, number of products, year of establishment. He should also keep himself in touch with the operation of the company.

Following instructions must be given to the client by the auditors before commencing the audit :

1. A list of books with the list f employees should be provided to the auditor.

2. A system of book keeping and internal connect should be provided.

3. Final trial balance and draft of final account should be ready for audit examination.

4. All supporting vouchers should be ready.

5. All types of schedules supporting the accounts should be prepared and kept in original form.


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