9)

it is clear that the auditor’s basic duty is to examine the accounts and its arithmetical
accuracy. He must ensure than the financial statements depicts true and fair view of
the state of affairs of the business. Since, Auditing is a full and critical examination of
the books of accounts to find The responsibility of the auditor is to check on the
accounts of the business organisation. They check on the authenticity of the
accounting process and make as assessment on whether they are according the
standards required by the book of accounts
Explanation:

 Auditing is a method that is done once the process of

accounting is complete for the financial year. It is a method of checking the
book of accounts and verifying the various expenditures and purchases that
have taken place during the financial year.
 The work of auditing starts after the accountant of the firm has completed his
job of entering all the entries in the book of accounts. These records
are checked by the auditor at the time of the auditing. The auditor checks on
the correctness of the accounting process and the book of accounts.
 The audit does a thorough checking of all the financial records, books and
the assets of the organisation and he must ensure that the book of
accounts are clean and give a good idea on the financial situation of the
enterprise. The auditor who conducts the audit should be certified
auditor and who knows his job.

10)
Continuous audit or a detailed audit is an audit which involves a detailed
examination of books of account at regular intervals i.e. one month or three months.
The auditor visits clients at regular intervals during the financial year and checks each
and every transaction. At the end of the year auditor checks the profit and loss
account and the balance sheet. A continuous audit is not of much use to small firm as
its accounts can be audited at the end of the financial year without much loss of
time.
Advantages of Continuous Audit
1. Early Location of Errors and Frauds
In the Continuous Audit, the audit visit the clients after a short period. So, he is in a
position to check the information completely in detail. It is helpful in checking the
errors and frauds easily. If the audit is conducted after the year ended. It is not
possible to find the errors or frauds easily.

2. Check on Frauds
In the Continuous Audit the errors are located earlier. So it is also helpful in the early
correction of errors and frauds because it is located at the time when it can be
corrected earlier.

3. Quick Rectification
Due to Continuous Audit errors are located easily and rectified at an early stage.

4. Special Attention
Before the finalization of accounts an auditor has a sufficient time to pay proper
attention to the checking of account and detection of frauds and errors.

5. Guidance to Client
The auditor remains in touch with the business details, so he also indicates about the
mistakes and gives valuable suggestions to the client to keep the accounts in proper
manner.

6. Useful for Declaration of Dividend

The continuous audit is also helpful for the declaration of the dividend. As the
accounts are checked throughout the year, so the audit accounts are ready for the
declaration of dividend.

7. Upto Date Accounts

Accounts of the business are kept up to date by the staff because they know that
auditor may visit and check the accounts at any time.

8. Chance of Over Looking Reduces

Auditor has a close contact with the details of the accounts and he has also sufficient
time to check the records. So the chances of over looking are reduced in this type of
audit.

9. Quick Presentation of Accounts

Continuous audit is very useful because accounts are maintained regularly. So as the
financial years end final audited accounts are presented before the shareholders.

10. Accounts Completion

Another audit benefit is the early completion of the accounts checking. The results of
audit can be found out just at the end of the accounting period.

11. Moral Check

In the continuous audit the auditor make the surprise visit in the business. The clerks
are not aware about the visit. So they are alert and efficient in their work. There is
less chances of frauds in this type of business.

12. Convenient for Auditors

In this audit, the several visits paid by the auditor to the client’s office in enable his
work to proceed easily and smoothly. It also increases his confidence in his capacity
to do his work efficiently and effectively.

13. Regular Staff

The regular visits performed by the auditor, make the clerks alert to maintain the
accounts up to date and accurate for fear that the auditor may land up in the office
any time.

14. Sufficient Time

Continuous audit provides sufficient time to the audit staff. The important and
ambiguous matters may require more time to draw conclusion. There is ample time
for such matters.

15. No Missing Entries

Continuous audit is also helpful in keeping the full record. In the record there is no
missing entries.

16. Early Correction of Errors

The continuous audit is helpful for early correction of errors. The auditor can point
out.

17. Prompt Filing of Returns

The continuous audit is also helpful for the prompt filing of returns. The
management can submit audited account to the registrar as soon as the end of the
year.

18. Early Meetings

This audit is helpful for the early meeting of the shareholders. The accounts are
presented for the distribution of profit.

19. Surprise Visits

The continuous audit provided chances of surprise visit to audit staff. The accounting
staff becomes alert due to surprise visit. It is essential for eliminating the chances of
error and frauds.

20. Upto Date Record

The continuous audit is useful for keeping the up to date record. Such record is
needed by management for borrowing funds, settlement of tax and dealing with
labour union.

11)
Advantages of Continuous Audit
1. Early Location of Errors and Frauds
In the Continuous Audit, the audit visit the clients after a short period. So, he is in a
position to check the information completely in detail. It is helpful in checking the
errors and frauds easily. If the audit is conducted after the year ended. It is not
possible to find the errors or frauds easily.

2. Check on Frauds
In the Continuous Audit the errors are located earlier. So it is also helpful in the early
correction of errors and frauds because it is located at the time when it can be
corrected earlier.

3. Quick Rectification
Due to Continuous Audit errors are located easily and rectified at an early stage.

4. Special Attention
Before the finalization of accounts an auditor has a sufficient time to pay proper
attention to the checking of account and detection of frauds and errors.

5. Guidance to Client
The auditor remains in touch with the business details, so he also indicates about the
mistakes and gives valuable suggestions to the client to keep the accounts in proper
manner.

6. Useful for Declaration of Dividend

The continuous audit is also helpful for the declaration of the dividend. As the
accounts are checked throughout the year, so the audit accounts are ready for the
declaration of dividend.

7. Upto Date Accounts

Accounts of the business are kept up to date by the staff because they know that
auditor may visit and check the accounts at any time.

8. Chance of Over Looking Reduces

Auditor has a close contact with the details of the accounts and he has also sufficient
time to check the records. So the chances of over looking are reduced in this type of
audit.

9. Quick Presentation of Accounts

Continuous audit is very useful because accounts are maintained regularly. So as the
financial years end final audited accounts are presented before the shareholders.

10. Accounts Completion

Another audit benefit is the early completion of the accounts checking. The results of
audit can be found out just at the end of the accounting period.
11. Moral Check
In the continuous audit the auditor make the surprise visit in the business. The clerks
are not aware about the visit. So they are alert and efficient in their work. There is
less chances of frauds in this type of business.

12. Convenient for Auditors

In this audit, the several visits paid by the auditor to the client’s office in enable his
work to proceed easily and smoothly. It also increases his confidence in his capacity
to do his work efficiently and effectively.

13. Regular Staff

The regular visits performed by the auditor, make the clerks alert to maintain the
accounts up to date and accurate for fear that the auditor may land up in the office
any time.

14. Sufficient Time

Continuous audit provides sufficient time to the audit staff. The important and
ambiguous matters may require more time to draw conclusion. There is ample time
for such matters.

15. No Missing Entries

Continuous audit is also helpful in keeping the full record. In the record there is no
missing entries.

16. Early Correction of Errors

The continuous audit is helpful for early correction of errors. The auditor can point
out.

17. Prompt Filing of Returns

The continuous audit is also helpful for the prompt filing of returns. The
management can submit audited account to the registrar as soon as the end of the
year.

18. Early Meetings

This audit is helpful for the early meeting of the shareholders. The accounts are
presented for the distribution of profit.

19. Surprise Visits

The continuous audit provided chances of surprise visit to audit staff. The accounting
staff becomes alert due to surprise visit. It is essential for eliminating the chances of
error and frauds.

20. Upto Date Record

The continuous audit is useful for keeping the up to date record. Such record is
needed by management for borrowing funds, settlement of tax and dealing with
labour union.

12)
According to section 227 (1) of the Companies Act, 1956, a company auditor has the
following rights:
1. Right of Access to Books of Accounts:
Every auditor of a Company has a right of access at all times to the books of accounts
and vouchers of the company whether kept at the head office of the company or
elsewhere.

Thus, the auditor may consult all the books, vouchers and documents whenever he
so likes. This is his statutory right. He may pay a surprise visit without informing the
Directors in advance but in practice, the auditors inform the Directors before they
pay their visits.

2. Right to obtain Information and Explanations:

He has a right to obtain from the Directors and officers of the company any
information and explanation as he thinks necessary for the performance of his duties
as an auditor.

This is another important power in the hands of the auditor. He will, however, decide
as to which information or explanations he thinks necessary to obtain. It the
Directors or officers of the company refuse to supply some information on the
ground that in their opinion it is not necessary to furnish it, he has a right to mention
the fact in his report.

3. Right to Correct any Wrong Statement:

The auditor is required to make a report to the members of the company on the
accounts examined by him and on every Balance Sheet and Profit and Loss Account
and on every other document declared by this Act to be part of or annexed to the
Balance Sheet or Profit and Loss Account which are laid before the company in
General Meeting during his tenure of office. The Directors have a duty to prepare
them and present them to the auditor.

The auditor cannot require but advise the Directors to amend their system of
maintaining accounts if it is faulty. If his suggestions are not carried out, he has a
right to refer the matter to the members. If the method of accounting is inadequate,
he must state the fact in his report that proper books of accounts have not been kept
by the company.

4. Right to visit Branches:

According to section 228, if a company has a branch office, the accounts of the office
shall be audited by the company’s auditor appointed under section 224 or by a
person qualified for appointment as auditor of the company under section 226.

Where the Branch Accounts are not audited by a duly qualified auditor, the auditor
has a right of access at all time to the books, accounts and vouchers of the company
and thus, may visit the branch, if he deems it necessary.

5. Right to Signature on Audit Report: Under section 229, only the person appointed
as auditor of the company, or where a firm is so appointed, only a partner in the firm
practicing in India, may sign the auditor’s report, or sign or authenticate any other
document of the company required by law to be signed or authenticated by the
auditor.

6. Right to receive Notice and other Communications relating to General Meeting

and attend them:
Under section 231 an auditor of a company has a right to receive notices and other
communications relating to General Meeting in the same way as a member of the
company. He is also entitled to attend any General Meeting which he attends or any
part of the business which concerns him as an auditor.

According to the power of the auditor, he may make any statement or explanation
with regard to the accounts as he may desire. He need not, however, answer any
questions.

7. Right of being indemnified:

Under section 633, an auditor (being an officer of a company), has a right to be
indemnified out of the assets of the company against any liability incurred by him
defending himself against any civil and criminal proceedings by the company if it is
proved that the auditor has acted honestly or the judgement delivered is in his
favour.

8. Right to have Legal and Technical Advice:

He has a right to seek the opinion of the experts and, thus, take legal and technical
advice. This is necessary to give his opinion in his report. (Re. London and General
Bank Case, 1895).
13)
Company registered in India is required to appoint an individual or a audit firm as it’s

first auditor after its incorporation. Accounts of the company’s are required to be

audited by such first auditor.

At the year end, financial statements along with the auditor’s report are to be filled

with register of companies (ROC) within 30 days after completion of annual general

meeting.

According to the companies act 2013, only a chartered accountant in practice can be

appointed as first auditor of the company. No other persons can be appointed as an

auditor of the company.

Appointment Procedure Of First Auditor

Section 139(6) of the companies act 2013, deals with the appointment of first auditor

of a company that is registered in India. Here are the procedures that the company

needs to follow for appointment of the first auditor;

1. Within 30 days from the date of incorporation, the company needs to

convey a board meeting by giving notice to all of its directors. Date of
incorporation is the date that is mentioned in the certificate of
incorporation.

2. In addition to other matters the company should also decide to pass a

resolution for appointment of first auditor of the company to hold office
till the conclusion of the first annual general meeting.
 3. Before the appointment, company needs to obtain a written certificate
from the first auditor to the effect that the appointment if made will be in
accordance to the limits specified in the companies act 2013.

4. After the decision of board of directors, the auditor needs to be intimated

within 7 days from the date of appointment.

While appointing the first auditor, company’s resolution for appointment of first

auditor should also contain the chartered accountant firm’s registration number. This

has been decided by the council of ICAI at its 292ndmeeting held on 13.01.2010.

In case board of directors failed to appoint the first auditor within 30 days of

incorporation then the company needs to convey a extraordinary general meeting by

issuing notice to all the members in writing. Such members within 90 days from the

date of failure to appoint shall appoint the first auditor in extraordinary general

meeting.

The first auditor as appointed by the company will hold office till the conclusion of

the first annual general meeting.

As per the new companies act 2013, company is required to inform registrar of

companies (ROC) in writing that auditor has been appointed by filling form ADT1

within 15 days from the meeting date in which auditor has been appointed.

However, such requirement is not applicable to the first auditors as these provisions

are applicable to the auditors appointed under section 139(1) of the companies act

2013 and first auditors are appointed under section 139(6) of the companies act
2013. This means, filling of form ADT1 is not required for first auditor under

companies act 2013.

14)

(i) Integrity objectivity and independence: An auditor should be honest, sincere,

impartial and free from
bias. He should be a man of high integrity and objectivity.
(ii) Confidentiality: The auditor should respect confidentiality of information acquired
during the course of his work and should not disclose the information without the
prior permission of the client, unless there is a legal duty to disclose.
(iii) Skill and competence: The auditor must acquire adequate training and
experience. He should be competent, skillful and keep himself abreast of the latest
developments including pronouncements of ICAI on accounting and auditing matters.
(iv) Work performed by others: If the auditor delegates some work to others and
uses work performed by others including that of an expert, he continues to be
responsible for forming and expressing his opinion on the financial information.
(v) Documentation: The auditor should document matters which are important in
providing evidence to ensure that the audit was carried out in accordance with the
basic principles.
(vi) Planning: The auditor should plan his work to enable him to conduct the audit in
an effective, efficient and timely manner. He should acquire knowledge of client’s
accounting system, the extent of reliance that could be placed on internal control
and coordinate the work to be performed.
(vii) Audit evidence: The auditor should obtain sufficient appropriate evidences
through the performance of compliance and other substantive procedures to enable
him to draw reasonable conclusions to form an opinion on the financial information.
(viii) Accounting System and Internal Control: The management is responsible for
maintaining an adequate accounting system incorporating various internal controls
appropriate to the size and nature of business. He auditor should assure himself that
the accounting system is adequate and all the information which should be recorded
has been recorded. Internal control system contributes to such assurance.
(ix) Audit conclusions and reporting: On the basis of the audit evidence, he should
review and assess the audit conclusions.

15)
Continuous audit:
The audit that remains continue throughout the financial year is called continuous
audit.
Continuous audit or a detailed audit is an audit which involves a detailed
examination of books of account at regular intervals i.e. one month or three months.
The auditor visits clients at regular intervals during the financial year and checks each
and every transaction. At the end of the year auditor checks the profit and loss
account and the balance sheet. A continuous audit is not of much use to small firm as
its accounts can be audited at the end of the financial year without much loss of
time.

Final audit:
Final audit is also called as the “Balance sheet audit” or the “Periodical audit”. Final
audit is started when the books of accounts closed at the end of the year. It is the
most satisfactory form of audit from the point of view of an auditor. In this audit
there is cent percent checking of the accounts. In case if the business has an effective
and proper internal control system. Then the audit sampling is possible.

Characteristics:
The following are the main essentials or features or characteristics of the final audit.
• In one session an auditor make only one visit.
• This type of audit can be conducted on both the large and small type of business.
• It is conducted when the accounting period ended.
• In this audit the auditor can do test checking.
• Auditor report is a prerequisite.
• It is conducted to report to shareholders.
• The audit is completed on a short period.

Statutory audit:
Statutory audit, also known as financial audit, is one of the main types of audit which
is to be done as per the statutes applicable to the entity. Its primary purpose is to
gather all relevant information so that the auditor can give his opinion on the true
and fair view of the company’s financial position as on the balance sheet date.
The purpose of the statutory audit is that the auditor gives his view independently
without being influenced in any manner. He will check the financial records and
provide opinion thereon in the audit report. It helps the stakeholders to rely
on financial statements. Stakeholders, other than shareholders, also get benefited
from this audit. They can take their call based on the accounts as they are audited
and authentic.

Internal audit:

Internal audit is a review of operations and records undertaken within a business by

specially assigned staff. It is a post-transaction review to evaluate the correctness of
records and the effectiveness of operations on a continuous basis in an organisation
by the paying staffs. The term 'internal audit' has been defined as the independent
appraisal of activity within an organisation for the review of accounting, financial and
other business practices as a protective and constructive arm of management.
It is a type of control which functions by measuring and evaluating the effectiveness
of other types of controls. Internal audit deals primarily with accounting and financial
matters, but it may also properly deal with matters of an operating nature.
The work of internal auditor is more or less the same as that of external or
professional auditor. Being the employee of the organisation, s/he has to see that
there is no waste and inefficiency in the organisation. An auditor has to ensure that
the organisation incurs liabilities in respect of its valid and legitimate activities. S/he
has to make efforts to find out the weakness of the internal control and internal
check system followed in the organisation and suggest necessary improvements.