PRINCIPAL ASPECTS TO BE COVERED IN AUDITING :

The following aspects are required to be covered by an auditor while doing audit of any organization. The principal aspects can also be called the functions of audit:

(i) Review of System and Procedures: Review of system and procedure is the primary function of auditing exercise. First an auditor needs to understand the system and procedures adopted by the entity to go further in the auditing exercise.

(ii) Review of Internal Control System: Review of internal control system is very important for the auditor as the effectives of internal control system will determine the extent of checking to be done by the auditor. The compliance test and substantive procedures performed by the auditor will determine the effectiveness of internal control system. If internal control system is effective, less checking is required and vice-versa. Moreover As per Company Audit report Order, 2003 also an auditor need to comment on the effectiveness of Internal control system in the organization so the review of internal control is necessary for carrying out the Auditing exercise.

(iii) Routine Checking/ Arithmetical Accuracy: It is the duty of the auditor to check the arithmetical accuracy of the books of account by checking the proper posting and balances of the books of accounts.

(iv) Accounting Principles: Auditor has to ascertain whether proper distinction has been made between the item of capital and revenue nature and also whether the item of income and expenditure of a particular period has been adjusted in the books of accounts of that accounting period.

(v) Books and Statements: Auditor has to compare the balance sheet and profit and loss account or other statement with the books of accounts and supporting vouchers to ascertain that the final accounts have been made in accordance with the underlying records.

(vi) Verification of Assets: It is the duty of the auditor to physically inspect the assets and their recording in the books of accounts and verify the legal and official documents to ascertain the existence, ownership, possession, classification and valuation of assets of an entity.

(vii) Verification of Liabilities: It is the duty of the auditor to inspect the books of accounts and verify the legal and official documents to ascertain the existence, obligation, completeness, valuation and disclosure of liabilities of an entity.

(viii) True and Fair View: The auditor has to give its opinion whether the financial statements depicts the true and fair view of the state of affairs of the organization.

(ix) Vouching: Auditor has to inspect documentary evidence that supports and substantiate a transaction

 (x) Statutory Compliance: Auditor has to ensure that all the statutory requirements has been complied by the entity like provisions of Income Tax Act, Companies Act and other acts if any applicable has been complied by the organization.

(xi) Reporting: The auditor has to report to the authority appointing him for conducting audit whether the financial statements of accounts examined actually reveals true and fair view of the state of affairs and of the profit or loss earned during the period by the organization.