AUDITING

E.MADHU
LECUTURER IN COMMERCE
 Introduction to Auditing
• Definition of auditing
Auditing is a systematic examination of
financial, operational, or compliance
information and processes within an
organization to provide an independent
assessment of their accuracy, fairness, and
conformity to applicable standards,
regulations, and internal policies.
 Key objectives of auditing
• Express an Opinion:
– Objective: To express an opinion on the fairness and
reliability of financial statements or other information
being audited.
• Compliance:
– Objective: To ensure that the organization complies with
relevant laws, regulations, and internal policies.
• Detect Fraud and Errors:
– Objective: To identify and report any instances of fraud,
errors, or irregularities that may impact the accuracy of
financial information
 Types of Audits
• Internal Audit:
– Objective: Conducted by internal auditors within the
organization to provide independent and objective
assessments of internal controls and operations.
– Focus: Risk management, internal controls, and operational
efficiency.
• External Audit:
– Objective: Conducted by external auditors who are
independent of the organization to provide assurance on the
reliability of financial statements.
– Focus: Financial records, accounting practices, and compliance
with auditing standards.
 The Audit Process
• Audit Reporting:
• Objective: Present audit findings and opinions
in a formal report.
• Activities:
– Draft the audit report.
– Obtain management's response to audit findings.
– Finalize and issue the audit report.
 Auditor's Responsibilities
1.Independence
2.Professional Competence and Due Diligence
3. Professional Skepticism
4. Confidentiality
5. Ethical Conduct
6. Communication with Management
 DUTIES OF AUDITOR
• The duties of an auditor encompass a range of
responsibilities aimed at ensuring the
accuracy, reliability, and transparency of
financial information. These duties are crucial
for maintaining the integrity of the audit
process and providing stakeholders with
assurance about the organization's financial
health. Here are the key duties of an auditor
 AUDIT NOTE BOOK
• An audit notebook, also known as an audit
working papers or audit documentation, is a
crucial tool used by auditors to record and
organize the evidence, procedures, and
findings throughout the audit process. The
audit notebook serves as a comprehensive
record of the audit engagement and supports
the final audit report.
 Internal vs. External Audits
• An external audit, also known as an independent audit, is
a systematic examination of an organization's financial
statements, operations, and internal controls conducted
by an independent external auditor.
• The primary objective of an external audit is to provide an
opinion on the fairness and reliability of an organization's
financial statements.
• This opinion is crucial for stakeholders, such as investors,
creditors, and regulatory authorities, as it enhances
confidence in the accuracy of the financial information
presented by the organization.
 Vouching
• Definition: Vouching involves selecting individual
transactions from the financial records and
examining the supporting documents and
evidence that substantiate those transactions.
• Purpose: The primary purpose of vouching is to
ensure that the transactions reported in the
financial statements are valid, properly
authorized, and supported by appropriate
documentation.
VOUCHING OF TRADING TRANSACTIONS

• Vouching of trading transactions is a critical

process in auditing, particularly in the context
of businesses engaged in buying and selling
goods.
• The term "trading transactions" typically refers
to transactions related to the purchase and
sale of goods, and vouching is the process of
verifying these transactions by examining
supporting documents.
VERIFICATION AND VALUATION
OF ASSETS
• The verification and valuation of assets are
integral components of the audit process.
• Auditors assess the existence, ownership, and
valuation of assets to ensure that a company's
financial statements present a true and fair
view of its financial position.
• Here's how auditors typically approach the
verification and valuation of assets
 Audit Report
• An audit report is a formal document issued by an auditor
at the conclusion of an audit engagement.
• The primary purpose of the audit report is to
communicate the auditor's opinion on the fairness and
reliability of the financial statements of an organization.
• The audit report is an essential component of the
external audit process, providing assurance to
stakeholders about the accuracy of the financial
information presented by the audited entity.
• Here are key elements typically included in an audit
report