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AUDITING AND CORPORATE GOVERNANCE (B.COM)

2 Marks Questions & Answers
Auditing
The international auditing practice committee defines, “the
independent examination of an entity, whether profit oriented or not,
irrespective of its size or legal form when such an examination is
conducted with a view to expressing an opinion thereon.”
Errors of omission
Errors of omission arises when a transaction is wholly or partly omitted
being properly recorded in the books.
Errors of commission
It arises when a transaction has been recorded and wrongly entered in
the original entry ledger due to negligence.
Investigation
Investigation means an act of detailed examination of books and
accounts and financial position of a business firm.
Audit assurance standard
Auditing standards means the measure and quality of audit performed
by an auditor.
Basic principles of auditing
Basic principles of auditing are the set of rules according to which the
books of accounts of a firm should be audited.
Audit techniques
Audit techniques are the devices, which are adopted in applying the
basic principles and auditing standards.
Audit planning
Pre-arranging and coordinating the work of audit of a client is called
audit planning.
Audit note book
It is a register or dairy maintained by audit clerk during the course of
audit. It is also called audit memorandum.
Audit working papers
Audit working papers are the documents which record during the
course of audit. It is also called audit files.
Audit programme
It is a written and predetermined plan of action for conducting an audit.
Tick mark
Tick marks are the symbols used during the course of audit, which
indicates how much of audit works are done.
Test checking (Testing)
It means to select and examine a representative sample from a large
number of similar items.
Routine checking
The process of checking posting, casting balancing in ledger and
subsidiary books are done in a routine manner are called routine
checking.
Surprise check
It is a technique used by an auditor. He pays surprise visit to the client
office and make surprise checking on certain important items.
Statutory audit
It is a legally required audit to present the fair picture of the financial
health of the organisation. It is a compulsory audit.
Private audit
Private audit refers to the audit of accounts of private business
enterprises. It is not compulsory audit.
Government audit
It means audit of accounts of government department and offices,
government companies and government statutory corporations.
Independent audit
It is also called external audit. The audit of account of the firm is
conducted by independent professionally qualified auditors.
Internal audit
It is an independent review of operation and other records of the firm.
Continuous audit
It is a statutory audit. This audit is done by professionally qualified
auditors. It is a detailed examination of all transactions.
Final audit
The final audit take place only after the end of the trading period. All
the transactions for the whole year completely recorded and balanced.
Balance sheet audit
It is a type of audit. In this type auditor verify balance sheet items such
as capital, liabilities, reserves, Provisions, assets and other items given
in the balance sheet.
Interim audit
It is a type of audit conducted in between two annual meetings.
Occasional audit
If the sole trader or partners conduct an audit for a specific object on
special occasion such audit are called occasional audit.
Partial audit
It is a type of audit, which is carried out in respect of specified aspect of
books of accounts of the business.
Standard audit
It is a type of audit rarely conducted in business firms. Under this type
certain items in the accounts are thoroughly scrutinized and analyzed.
Management audit
It is the systematic evaluation of the performance of management of an
enterprise. It is the critical review of all aspects and process of
management.
Cost audit
Cost audit is the verification of the correctness of cost records with a
view to ascertain the cost of product.
Cash audit
It is a type of audit under which only cash transactions are audited.
Special audit
It is a type of audit conducted by the central government for some
special objectives. The person who conduct special audit is called
special auditor.
Operation audit
It is a part of management audit. It is usually conducted by external
auditor known as management consulting services.
Efficiency audit
It is a type of audit conducted for the purpose of increasing efficiency of
the firm. It is an aid to management.
Detailed audit
It referred as continuous audit, running audit or complete audit. Under
this type of audit, the auditor checks detail all books of accounts with
regular intervals.
Propriety audit
It is a part of management audit. It is treated as high form of audit.
Performance audit
It is a part of management audit. In this type of audit, auditor evaluate
the performance of the firm.
Regulatory audit
It is conducted by private business firm. The main object is to see
whether every transaction is approved and sanctioned by competent
authority.
Inflation audit
It is the audit related to inflation accounting. The accounting effect of
change in prices is known as inflation accounting.
Human resource audit
It is the process of evaluating human resources programs and practices.
Social audit
It is the way of measuring, understanding and reporting an
organization’s social and ethical performance.
Energy audit
It is an inspection survey and analysis of energy flows for energy
conservation.
Peer review
It is a supervision audit. It is an audit of auditor’s performance.
Forensic audit
It is a detailed examination and evaluation of financial and non-financial
records to collect evidences that can be used in a court of law.
Environment Audit
It is a systematic, documented, periodic and objective process in
assessing an organization’s activities and services in relation to
assessing compliance with relevant statutory and internal
requirements.
Tax audit
Tax audit refers to verification of books of accounts maintained by a tax
payer. The purpose of tax audit is to validate income tax computation
made by the tax payer.
Vouching
It means a careful examination of the original documentary evidence
such as invoice, receipts, minutes, contracts etc.
Vouchers
Vouchers is documentary evidence, in support of transactions in the
books of accounts.
Primary vouchers
Primary vouchers are original vouchers. They are written or printed, or
typed evidence in original.
Example: Cash memos, Invoices. Pay in slip
Secondary vouchers
When original voucher is not available copy of the original evidences
are produced in support or subsidiary evidence such vouchers are
called secondary or collateral vouchers.
Example: Bank reconciliation statement, copy of sales memo.
Teaming and lading/ lapping
It is a method of committing fraud in connection with the receipts of
cash from debtors.
Verification of assets and liabilities
It means examination of establishing truth as existence, ownership,
possession and valuation of assets and liabilities in the balance sheet.
Valuation of assets and liabilities
It means estimation of various assets and liabilities. It is the duty of the
auditor to confirm assets and liabilities appear in the balance sheet in
fair value.
Window Dressing
It means manipulation done by the management of the company in the
financial statement in order to present more favourable picture of the
company.
Internal control
It is an overall control system of the internal management. In this
system number of checks and control exercised in the business to
ensure its efficient and profitable working of the firm.
Internal audit
It is an independent review of operation and other records of the firm.
Internal check
Internal check simply refers to an arrangement of transactional work
amongst the members of the staff.
Audit report
It is a written document which present the purpose, scope and result of
the audit.
Clean report
If the auditor satisfy the affair of the company and the fairness of the
final accounts of the company, the auditor issue clean report. It is also
called positive, unqualified and conventional report.
Qualified report
If the auditor does not satisfy the affair of the company and the fairness
of the final accounts of the company, the auditor issue qualified report.
It is also called negative report.
Audit certificate
It is a certificate of truth of the statement that the auditor makes. It is a
written confirmation of the accuracy of affairs of the company.
Audit committee
Audit committee is an independent committee formed with the board
of directors of the company to oversee financial reporting and
disclosure.
Corporate governance
Corporate governance may be defined as a broad range of policies and
ethical practices which are adopted by an organization in its dealings
with the stakeholders.
Insider trading
It is an unlawful act when the insiders are using the unpublished
information’s for their self-benefits.
Rating agencies
These are the independent financial service agency which provides
different types of rating to the organization.
Corporate governance rating
It is the evaluation or assessment of the system through which an
organization is managed.
E-governance
It is the usage of information and communication technology by the
government to provide and facilitate government services, exchange of
information, communication transaction etc.
Green governance
It is a systematic life cycle approach for ensuring the sustainability of
the business.
Clause 49 listing agreement
The clause 49 has laid down seven conditions that are furnished by the
listed companies in order to ensure their listing in the official list of
stock exchanges.
Shareholders activism
It is simply refers to shareholders intervention in the affairs of the
company.
Class action suit
It is the law suit against the company or individual against by plaintiff.
Whistleblowing
It is the act of reporting malpractices within an organization to the
internal or external parties.

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JUBAIR MAJEED

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