SCOPE OF AUDITING :
Audit scope determines the time involved in audit exercise, depth of auditing, aspects to be covered etc. Audit
scope depends on nature of audit, objectives of audit & terms of engagement, requirement of applicable legislations and auditing standard. However the terms of engagement cannot, restrict the scope of an audit in relation to matters which are prescribed by legislation or by the auditing standard.
The audit should be organized to cover adequately all aspects of the enterprise as far as they are relevant to the audit objectives. For example while carrying out the statutory audit, to form an opinion on the financial statements; the auditor should be reasonably satisfied as to whether the information contained in the underlying accounting records and other source data is reliable and sufficient as the basis for the preparation of the financial statements. In forming his opinion,the auditor should also decide whether the relevant information is properly disclosed in the financial statements subject to statutory requirements, where applicable . The auditor assesses the reliability and sufficiency of the information contained in the underlying accounting records and other source data by:
A. Making a study and evaluation of accounting systems and internal controls on which he wishes to rely and testing those internal controls to determine the nature, extent and timing of other auditing procedures; and
B. Carrying out such other tests, enquiries and other verification procedures of accounting transactions and account balances as he considers appropriate in the particular circumstances.
The auditor determines whether the relevant information is properly disclosed in the financial statements by :
(a) Comparing the financial statements with the underlying accounting records and other source data to see whether they properly summarize the transactions and events recorded therein; and
(b) Considering the judgments that management has made in preparing the financial statements accordingly, the auditor assessees the selection and consistent application of accounting policies, the manner in which the information has been classified, and the adequacy of disclosure.