PRINCIPLES OF AUDITING

Audits depend on a set of principles to make them effective and reliable tools in supporting
management controls and policies. Audit principles provide information for organisations to
act and improve their performance in business.
According to the ISO, auditing must be based on these six basic principles:

1. Integrity:
o Audits are performed with diligence, honesty, and responsibility
o Observation and compliance with applicable legal requirements
o Demonstrating competence when performing an audit
o Audits are conducted in an impartial manner
o Auditors remain unbiased or fair in all their dealings
o Being sensitive to influences exerted on the judgment during an audit.

2. Fair Presentation
o Makes sure that reports, findings and conclusions are truthfully and accurately
reflective of the audit activities
o Reporting of significant obstacles encountered during the audit
o Reporting of unresolved or the diverging opinions between the business being
audited and the audit team
o Makes sure that communications are objective, truthful, accurate, timely, clear
and complete.

3. Due Professional Care

o Apply due care based on the importance of tasks and on the confidence given
to you by a client
o Make reasonable judgments in all audit situations.

4. Confidentiality
o Practice discretion and protection of information when auditing
o Never use audit information for personal gain or in harmful way to legitimise
the interests of an auditee
o Handle sensitive and confidential information properly.

5. Independence
o Remain independent from the business or activity being audited
o Always be free of conflict or bias
o Be objective all throughout the audit process
o Make sure that findings and conclusions are based on verifiable evidence
o Internal auditors should be independent of what is being audited.

6. Evidence-Based Approach
o Collate and collect verifiable evidence
o Evidence should be based on samples of ready information
o Use samples because audits are to be conducted in a limited amount of time
and with limited resources
o Properly or appropriately use samples to add confidence on audit conclusion.

TECHNIQUS OF AUDITING
Auditing technique is defined as “any technique used by auditors to determine deviations
from actual accounting and controls established by a business or organization as well as
uncovering problems in established process and controls”.
Following are the important techniques of audit.

1. Examination of books of accounts: The basic technique of an auditor is to examine

the books of accounts. The examination is conducted to verify the accuracy of data.

2. Vouching: It refers to the examination of the original documentary evidence supporting

the transaction. Examples for vouchers are invoices, bills, receipts, debit and credit
notes, etc.

3. Inquiry: The auditor makes inquires and collects information from persons inside and
outside the organization to check the correctness of the recorded data.

4. Sampling: Sampling refers to selecting and checking a few items from the whole
accounting information.

5. Confirmation: The auditor contacts debtors, creditors, officials, etc and collects
information which helps him to confirm the transactions.

6. Compliance test: These tests are employed by the auditor to check the effectiveness of
the internal control system prevailing in the organization.

7. Financial system analysis: Financial statements such as profit and loss account and
balance sheet re analyzed to establish relationship between two accounting figures.
Auditors generally use ratio analysis to test liquidity, solvency and the profitability of
concerns.

8. Computer techniques: The auditor may use techniques such as audit software, test
packing, mapping, etc to test the accuracy of accounting data.

9. Observation: The auditor relies on personal observation and witnesses the physical
stock taking conducted at the end of the year.

10. Expert opinion: the auditor contacts experts like engineers, lawyers, etc to gather their
opinion about