Submitted by: Submitted by cloud6
Views: 149
Words: 455
Pages: 2
Category: Business and Industry
Date Submitted: 07/09/2013 11:22 PM
Auditing for Managers
Need of auditing
Advantages and limitations, type of audit, scope of audit
Advantages
1. Judges the correctness of financial statements
2. Detect Errors and Mistakes
3. Prevent Errors and Frauds
4. Benefits through specified audits
Manager can get the service of auditor in doing what beyond his capacity and ability
Judges the correctness of the financial statements
Independent opinion on accounts (true and fair view)
Reliability on financial statements and supporting documents
Defalcations
Assessment of the degree of adequacy and efficiency of the internal control
Evaluation of the accounting system in use
Detect and prevent errors and mistakes
i. Clerical errors
Errors of omission
Errors of commission
Compensatory errors
Errors of duplication
Trial Balance errors
ii. Errors of principle
Incorrect allocation (capital and income expenditures)
Omission of outstanding assets and liabilities
Incorrect valuation of assets
Inadequate provision for depreciation
Wrong provision for bad and doubtful debts
Overvaluation or undervaluation of closing stock
iii. Locate errors
(Only if the agreement says that auditor has to locate errors)
Trial Balance checking
Short cut method
Extensive checking
Note; Check casts of TB lists of debtors and creditors
Establish the amount of difference
Personal and impersonal ledger
Closing balances
Try to locate the error by getting half of the difference of trial balance columns. If the difference is divisible by nine it may mean an error of transposition of figures
If the difference is round figure look for total difference or carry forward balances
3. Detect and Prevent frauds and
i. Misappropriation and defalcation...