BCom Company Audit in Auditing Notes Study Material
BCom Company Audit in Auditing Notes Study Material
In the preceding chapters an effort has been made to explain the basic principles
of Audit which have been universally recognized for conducting audit of
institutions of different nature and character. Limited companies have their own
constitution and, as such, they work under a different set of rules which are not
applicable to the sole proprietary concerns and partnership firms. There are
special rules and legal provisions to conduct audit of companies like banking,
insurance, etc., a study of which is of dire necessity and importance for an
auditor.(BCom Company Audit in Auditing Notes Study Material)
Company Law
The Companies Act, 2013 has brought about various changes for the direction
and administration of limited companies. A company auditor is expected to be
familiar with all these provisions.
The Company Law has distinctly defined the rights, powers and duties of an
auditor who cannot be relieved of his legal responsibilities. It is needless to state
that the company form of organization is rather the most important form in the
business world today.(BCom Company Audit in Auditing Notes Study Material)
Secondly, a company has its separate legal entity. Its owners, viz., shareholders
are distributed over long distances and hence, they cannot know of their
investments beings safe or otherwise unless the Directors duly inform them
through their reports. This is why the audit of accounts of a limited company is
made compulsory by law.(BCom Company Audit in Auditing Notes Study
Material)
An auditor has to study the Company Law so as to familiarize himself with his
rights and duties. There are provisions in the law in regard to issue of Share
Capital, preparation of Memorandum of Association and Articles of Association,
appointment of Directors, and Managing Directors, issue of Prospectus and other
important matters which an auditor has to study for the successful conduct of a
company’s audit.(BCom Company Audit in Auditing Notes Study Material)
AUDITING STANDARDS
Many scams have taken place in the past where Chartered Accountants failed in
their duty to point out irregularities and falsification of accounts by their clients.
In the case of Satyam Computers, Ramlinga Raju showed inflated profits from
year 2003 to 2008 but auditor failed to point out this in their audit reports. The
auditors of Punjab Nation Banks could not detect anything when Nirav Modi and
, Mehue Choksi during a periodu time took loans exceeding rupees thirteen
thousand crores on the basis of bogasa documents with the connivance of the
bank staff and ran away to foreign countries. are many more instances, where the
auditors failed in their work and were negligent performance of their duties with
care and diligence.(BCom Company Audit in Auditing Notes Study Material)
A need, therefore, had always been felt that there should be some set of rules and
procedures about doing audit work which are called ‘auditing standard’ s. These
standards have been laid for maintaining quality of audit work performed by
Chartered accountants so that the financial statements give a true end fair view of
the accounts organisations.
International Auditing and Assurance Standard Board (IAASB)
The International auditing and Assurance Standard Board is an independent
standard-setting body that serves the public interest by setting high quality
international standards for auditing, assurance and other related areas, and by
facilitating their adoption and implementation.
By doing so this organisation enhances the quality and consistency of auditing
practices throughout the world and strengthens public confidence in global
auditing and assurance profession.
IAASB’s standards are revised from time-to-time, to enhance quality of auditors’
reports for investors and other users of financial statements.
Auditing and Assurance Standard Board of India
The Institute of Chartered Accountants of India has constituted ‘Auditing and
Assurance Standard Board (AASB). The main function of this Board is to review
existing auditing practices in India and to develop statements of Auditing’ (SA)
which may be issued by this Institute from time-to-time.
The Auditing and Assurance Standard Board (of India) takes into account the
international auditing guidelines issued by International Auditing and Assurance
Standard Board and there are integrated with conditions and practices being
followed in India.(BCom Company Audit in Auditing Notes Study Material)
Objectives
The objectives of Auditing and Assurance Standard Board of the Institute of
Chartered Accountants of India are:
(1) To review the existing and emerging auditing practices worldwide and identify
areas in which Standards and Statements on Auditing need to be developed.
BCom Company Audit in Auditing Notes Study Material
In the preceding chapters an effort has been made to explain the basic principles
of Audit which have been universally recognized for conducting audit of
institutions of different nature and character. Limited companies have their own
constitution and, as such, they work under a different set of rules which are not
applicable to the sole proprietary concerns and partnership firms. There are
special rules and legal provisions to conduct audit of companies like banking,
insurance, etc., a study of which is of dire necessity and importance for an
auditor.(BCom Company Audit in Auditing Notes Study Material)
Company Law
The Companies Act, 2013 has brought about various changes for the direction
and administration of limited companies. A company auditor is expected to be
familiar with all these provisions.
The Company Law has distinctly defined the rights, powers and duties of an
auditor who cannot be relieved of his legal responsibilities. It is needless to state
that the company form of organization is rather the most important form in the
business world today.(BCom Company Audit in Auditing Notes Study Material)
Secondly, a company has its separate legal entity. Its owners, viz., shareholders
are distributed over long distances and hence, they cannot know of their
investments beings safe or otherwise unless the Directors duly inform them
through their reports. This is why the audit of accounts of a limited company is
made compulsory by law.(BCom Company Audit in Auditing Notes Study
Material)
An auditor has to study the Company Law so as to familiarize himself with his
rights and duties. There are provisions in the law in regard to issue of Share
Capital, preparation of Memorandum of Association and Articles of Association,
appointment of Directors, and Managing Directors, issue of Prospectus and other
important matters which an auditor has to study for the successful conduct of a
company’s audit.(BCom Company Audit in Auditing Notes Study Material)
AUDITING STANDARDS
Many scams have taken place in the past where Chartered Accountants failed in
their duty to point out irregularities and falsification of accounts by their clients.
In the case of Satyam Computers, Ramlinga Raju showed inflated profits from
year 2003 to 2008 but auditor failed to point out this in their audit reports. The
auditors of Punjab Nation Banks could not detect anything when Nirav Modi and
, Mehue Choksi during a periodu time took loans exceeding rupees thirteen
thousand crores on the basis of bogasa documents with the connivance of the
bank staff and ran away to foreign countries. are many more instances, where the
auditors failed in their work and were negligent performance of their duties with
care and diligence.(BCom Company Audit in Auditing Notes Study Material)
A need, therefore, had always been felt that there should be some set of rules and
procedures about doing audit work which are called ‘auditing standard’ s. These
standards have been laid for maintaining quality of audit work performed by
Chartered accountants so that the financial statements give a true end fair view of
the accounts organisations.
International Auditing and Assurance Standard Board (IAASB)
The International auditing and Assurance Standard Board is an independent
standard-setting body that serves the public interest by setting high quality
international standards for auditing, assurance and other related areas, and by
facilitating their adoption and implementation.
By doing so this organisation enhances the quality and consistency of auditing
practices throughout the world and strengthens public confidence in global
auditing and assurance profession.
IAASB’s standards are revised from time-to-time, to enhance quality of auditors’
reports for investors and other users of financial statements.
Auditing and Assurance Standard Board of India
The Institute of Chartered Accountants of India has constituted ‘Auditing and
Assurance Standard Board (AASB). The main function of this Board is to review
existing auditing practices in India and to develop statements of Auditing’ (SA)
which may be issued by this Institute from time-to-time.
The Auditing and Assurance Standard Board (of India) takes into account the
international auditing guidelines issued by International Auditing and Assurance
Standard Board and there are integrated with conditions and practices being
followed in India.(BCom Company Audit in Auditing Notes Study Material)
Objectives
The objectives of Auditing and Assurance Standard Board of the Institute of
Chartered Accountants of India are:
(1) To review the existing and emerging auditing practices worldwide and identify
areas in which Standards and Statements on Auditing need to be developed.
