PRINCIPLES OF AUDITING :-Fundamental principles are those according to which the books of business accounts are audited. These principles can be changed according the desire of the auditor.
We discuss the main principles of auditing under these headings :
1. Planning :-
It is the basic principle of auditing. The auditor should plan before starting the work. In planning auditor decides accounting about the system and internal control procedure.
2. Honesty :-
Honesty and sincerity is the second important principle of auditing. The loyalty of auditor to work and profession must be beyond the doubts.
3. Impartiality :-
In case of audit the attitude of the auditor must be impartial. Keeping in view this principle his personal views may not be included in the audit report.
4. Secrecy :-
Secrecy must be maintained by the auditor during the process of audit. He cannot disclose any information to the third party.
5. Evidence :-
During the audit the auditor can collect the evidence through the working papers. He can frame his opinion on the audit evidence. The nature and source of evidence must be kept in view by the auditor.
6. Consistency :-
It is an important principle of auditing. In case of selecting the rates of depreciation and valuation of stock the accountant must follow the rates of the coming years. In this regard there should be consistency and changes are not acceptable.
7. Legal Frame Work :-
The business activities may run within the rules and legal formalities. To protect the rights of the interested parties rules must be applied.
8. Working Paper Preparation :-
The auditor collect documents providing evidence that audit was carried out according the principles. The auditor prepares the working paper and kept in this custody as a proof.
9. Internal Control :-
The auditor will examine the accounting system and inter control. To frame his opinion, he keeps in view the evidence obtained from the books.
10. Report :-
According the principle of auditing a report will be prepared by the auditor at the end. It may be conditional or unconditional. The auditor can draw conclusion and disclose the facts and figures about the business for general information.
TECHNIQUES OF AUDITING or AUDIT TECHNIQUES :-
Techniques of auditing means the procedure and method which is adopted by the auditor in checking the accounts.
Following are the important techniques of audit :
1. Examination Of Record :-
This technique is commonly used by the auditors, The inspection of books and documents is made to verity the validity of data.
2. Inquiry :-
The auditor can also use the technique of inquiry. He can get the information from resource persons inside or outside the enterprise.
3. Sampling :-
Auditor can select few items from whole accounting information. This technique enables the auditor to obtain and evaluate the evidence of some characteristics of the whole class. It is helpful in forming the conclusion.
4. Confirmation :-
To ensure the accuracy of the data auditor can collect the information from the debtor. Confirmation is response to an inquiry to prove certain data recorded in the books.
5. Compliance :-
To check the arithmetical accuracy of accounting record, the balancing accounts can be compared with the vouchers to test the reliability of data.
6. Compliance Test :-
These tests are designed to check the effectiveness and compliance of internal control. In obtaining the audit evidence, auditor is concerned with the existence of effective internal control.
7. Use Of Computer Techniques :-
There are large number of audit techniques like audit software, test packs and mapping which can be used by the auditor to test the accuracy of the data.
8. Substantive Test :-
There are designed to obtain evidence that data produced by accounting system is accurate or not. It has two kinds :
a) Test of detail transaction.
b) Test of significant ratios and trends.
9. Dependence On Experts And Auditors :-
The auditor has to rely on the internal and other auditors to complete his work. He has also to rely on other experts like lawyers, engineers and doctors for their expert opinion about the business.
10. Analytical Review :-
It consists of studying significant ratios, trends and investigating different changes. This review procedure is based on the expectations of relationship among the past and present data.
DIFFERENCE BETWEEN PRINCIPLE AND TECHNIQUE OF AUDITING :-
Techniques of auditing may b changed by the auditor but principles of auditing will remain same.
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www.AngeloTheExplorer.com
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