Quick Revision: Audit and accounting

Audit and accounting:

Auditing is defined as the systematic and independent assessment and examination of data, statement, records, operations and performance, financial or otherwise of an enterprise.

 

Objectives of Auditing:

PRIMARY OBJECTIVE

  • Examining the system of Internal check
  • Checking arithmetical accuracy of books of accounts
  • Verifying the authenticity and validity of transactions.
  • Checking the proper distinction of capital and revenue of transactions
  • Conforming existence and value of assets and liabilities.

 

SECONDARY OBJECTIVE

  • Detection and prevention of errors
  • Under or over valuation of stock
  • Detection and prevention of frauds

 

OTHER OBJECTIVE

  • To provide information to the Income Tax Authority
  • To satisfy the provision of the Company Act
  • To have moral effect

 

 

SOCIAL AUDIT

Social Audit:    It is an independent and systematic assessment and evaluation of an organisation as it relates to the attainment of its social goals. It is an instrument of social accountability of an organisation.

 

Basis of Social Audit: Social Audit is based on the principle that democratic local governance should be carried out as far as possible, with the consent and understating of all concerned.

Objectives of social Audit:

  • To identify and measure the periodic net social contribution of an individual firm.
  • To help determine whether an individual firm plans and strategies and practices are carried out in accordance with social principle.
  • To make available in an optimum manner to all social commitments, relevant information on a firm’s objective, ultimate goals, policies, programmes, performance and contribution to social goals

 

 

Expected questions:

  • Meaning of Auditing
  • Objectives of Auditing
  • Social Audit
  • Basis of social audit
  • Objectives of social audit

 

                                Efficiency Audit:

It indicates towards appraisal or scrutiny of actual performance with reference to expected efficient standards.

 

Objectives of EA:

  • Optimum utilisation of investment
  • Investment channelized in most profitable lines

 

Parameters of EA:

  • Return on Capital.
  • Capacity Utilisation.
  • Optimum utilisation of men, machines and materials.
  • Export performance and import substitution.
  • Liquidity position
  • Pay back period.

 

 

Performance Audit:

 

Objective and systematic examination of evidence to ensure that the performance of PSU is adequate.

 

Elements of Performance Audit:

  • Economy: Resources are acquired at economical price with due regard to appropriate objective, acquired at appropriate time and having appropriate quality
  • Efficiency : Use of minimum resources to produce maximum output, use of same level of resources to produce more output
  • Effectiveness: Whether the expenditure incurred meets the intended objective, Deviation between actual and standard objective

 

 

 

 

 

 

 

 

 

 

 

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