BCom Notes Part II Auditing Main Objectives of Accounting
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Main Objectives of Accounting
Introduction The main purpose of Auditing or object is to find the opinion of an auditor about the correctness and reliability of accounts and the financial position of the business concern. For this purpose auditor has to check the arithmetical accuracy of the books of account and to find out that whether the transactions entered in the books of account are correct or incorrect. This is done by various methods like inspecting comparing and checking. So all that work that is done by the auditor ensures him that figures are facts.
Main Objectives of Auditing
1. Reporting
The objective of an audit of financial statement is to enable the auditor to express an opinion whether the financial statements are prepared, in all material respects in accordance with an identified financial reporting frame work. The phrases used to express the auditor’s opinion are given a true and fair view or present fair in all material respects, which are equivalent terms.
2. Purpose of Audit
The purpose of audit is to check the proper accounting to policies. For the better accounting system it is necessary to follow the accounting policies. Only by this way we can get the effective result. The auditor’s purpose is to check that accounting policy has been followed or not.
3. Law Which is Prescribed
Another objective of the auditor is to check that the accountant has used the prescribed law. There are so many laws related to working of business. The auditor can indicate whether the proper law has been applied or not.
4. Opinion
The purpose of the audit is to get the correct opinion about the business so for this the auditor should be honest, confident and he must have the ethical standard for his work.
5. True and Fair View
The purpose of the auditing is to determine the correctness of statement. After auditing the financial statement has the correct and true view about the business.
6. Prevention of Errors
The audit is committed for the prevention of errors. These errors can be prevented through internal check also.
7. Detection of Errors
Another purpose of audit is to detect the errors. The auditor uses different ways and means to find your errors.
8. Prevention of Fraud
The prevention of fraud is another purpose of auditing. It consists of the omission of the effect of transaction, recording or transaction without substance etc.
9. Detection of Fraud
The detection of fraud is also the purpose of the audit. It is the responsibility of the management to detect the fraud.
10. Cost Audit
To verify the correctness of cost accounting is the main purpose of the cost audit. The management had a duty to follow the cost objectives in maintaining the records of business transaction.
11. Property Audit
The examination of the proper use of money is the main purpose of the property audit. How and where the money of business is used must be mentioned in this audit.
12. Management Audit
The management audit refers to the audit of the management structure either these are according to the requirements of the business or not. It is a voluntary audit.
13. Tax Audit
Tax audit is conducted to satisfy the income tax officer. This type of audit is conducted to determine the income. Usually the partnership and the sole proprietorship conduct this type of business.
14. Social Audit
The measurement of social performance of the business is the main object of social audit.
15. Profit Verification
Audit is concern to check the profit verification in a business concern. Profit has to main position in any type of business, only the expert auditors can check the fluctuation of the Profit.
16. Admission of Partners
For the admission of the new partner the audit plays an important role. It provides information to new as well as old partner for the settlement of the new terms according to the volume of assets and liabilities.
17. Purchasing Price
For the buyers and sellers of a certain business concern it is necessary to know the real value of the business assets and liabilities. The audit is helpful in finding out the real value of the business.
18. Loan From Lenders
Audit is also very helpful and it is also its purpose to find the value of the assets and liabilities or its financial position. From which the management can approach the banks and all the financial institutions for the loan. Auditor report is a proof for the business concern.
19. Operations
It is a part of social audit. The main purpose is to prevent the misuse of resources.
20. Moral Check
Moral check is in fact or more clearly a psychological check. Its object is to create a fade mind to the staff of the business that after a particular period of time a specific person has duty to check the books of accounts.
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