LIMITATIONS OF AUDITING

FRAUDS BY MANAGEMENT: Auditing fails to check planned- frauds.

The management can play tricks to manipulate the accounts in order to conceal their inefficiencies. The frauds committed in such circumstances

are not disclosed. The audited accounts could not show the true and fair view.

WRONG CERTIFICATES: Auditing is based on many certificates taken from management and other persons. The certificates may not provide the true information. Auditing may fail to ‘provide the desired results.

When certificates provide wrong information, the financial statements cannot show correct position.

3.       MISLEADING CLARIFICATION: Auditing fails to disclose correct information. The background of entries may not be clear to audit staff. The management may not provide correct clarification. The auditor is bound to present his report even of the clarification is not true. The auditing fails to help many persons who rely on audit report.

4.       NO TRUE PICTURE: The auditing does not present cent percent true picture. The auditor is concerned with figures shown in the books of accounts. Auditing fails to disclose true picture when figures have been manipulated. The purpose of audit fails when it is unable to depict real

scene of business affairs.

5.       NO CORRECT VIEW: Auditing fails to present correct view. There are limitations of accounting so figures are not facts. These figures are based on opinion. Moreover the auditor has to make judgement on various matters. The personal judgement may be wrong in certain cases. Thus auditing is unable to disclose correct view.

6.       NO SUGGESTION: The audit is conducted to show fair view of financial

  1. statements. Auditing is not concerned with management policies. The auditor cannot guide management for better use of capital. The auditor examines what has been done. He is unable to suggest what should

have been done.

7.       ABSENCE OF HONESTY: The auditing work depends upon various

  1. professional and personal qualities of an auditor. Honesty and independence are highly essential traits. The auditor must certify which is true. Management and other parties should not influence him. The absence of honesty and independence means failure of audit purpose
  2. 8.       BIAS OF AUDITOR: The auditing fails to present fair view due to bias
    of an auditor. It is the quality of an auditor that he should be independent. The opinion of auditor is included in audit work when such quality is missing. The biased auditing fails to help many people.
  3. 9.       HIGH COST: The audit work is completed with cost. The cost of audit
    should not exceed the cost of errors and frauds. The small-scale business enterprises consider it as a burden on their performance. Auditing fails to serve millions of business entities.
  4. 10.    PAST ACTION: Auditing is nothing more than checking of past activities. It is not concerned with present or future. The audit fee increases the cost of business concern. Such cost does not help to

Similar Accounting Articles:

This entry was posted in Auditing and tagged , . Bookmark the permalink.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>