Functions Of Audit

1. ACCOUNTING SYSTEM: The function of auditing is to study the accounting system. It can be stated as a series of tasks in an entity by which transaction are processed a means of maintaining financial records. Such a system should recognise, calculate, clarify, post, summarise and report transactions. The auditor should understand the accounting system in operation in order to determine the nature, timing and extent of other audit procedures.

2. INTERNAL CONTROL: Internal control is a process, which determines that management policies are carried out and accounting principles are followed. This function helps to safeguard assets, location and prevention of errors and frauds. Moreover the management is able to prepare reliable financial statements in time. When the auditor notes that he can rely on internal control, the audit procedure may be less extensive. The effectiveness of internal control is to be determined by an auditor.

3. VOUCHING: An auditor can inspect the documents that support and prove the business transactions. The date, amount, and other details are checked. All entries in bogks of accounts are made on the basis of relevant vouchers. This function is essential to determine the accuracy, of accounting records.

4. ARITHMETIC ACCURACY: It is a function of auditing to check the arithmetical accuracy of account books and other papers. The audit clerk verifies the figures. The errors and frauds are discovered. The management can take steps to rectify the mistakes. The responsibility of fraud can be fixed. This function helps the auditors to show the true and fair view of accounting statements

5. CAPITAL AND REVENUE: It is a function of auditing to make difference between capital and revenue items. The revenue items are compared to determine income. The capital items are compared to note the financial position of etny business. The income and expenses related to many years can be divided into current and coming year

6. VERIFICATION OF ASSETS: The verification of assets is a function of auditing. Verification is concerned with the determination of value, ownership, possession and any charge on asset of any business. The auditor can check the existence of asset. The documents and books can show the purchase price. If any loan is taken on security of an asset, such information can be collected. It is the duty of an auditor to verify these assets.

7. VERIFICATION OF LIABILITIES: The auditor can verify the liabilities from the books of accounts. The auditor must receive a Certificate form management that all liabilities are included in the balance sheet. The ai.:ditor oar Nrite :etters to creditors for verification of :iabilities

8. VALUATION OF ASSETS: The auditor can apply accounting, conventions and principles teexamine and test the value of assets. The management calculates the value to assets. The auditor must critically check the assigned values. He can get help from techkaical personnel.

9. VALUATION OF LIABILITIES: The values of liabilities are stated in the balance sheet. The management can assess the value on the basis of dealing made. The auditor can examine the value of liabilities from the books of accounts and other papers. The auditor can confirm the value from outside sources. Independent experts should determine the value of contingent liabilities.

10. LEGAL REQUIREMENT: There are various laws like Companies Ordinance 1984, Income Tax Ordinance 2001 and Stock Exchange Rules 1971. It is the duty of the auditor to check that financial statements_ are prepared under the legal requirements. The auditor can note this point in his report that management has followed legal formalities.

REPORTING: It is the duty of an auditor to submit his opinion in writing. The report may be clean or conditional. An auditor is an independent person. If he is satisfied about true and fair view, he can present clean report. In case of some weakness he can give qualified report

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