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Auditing: Principles and Techniques

Book Description

Auditing: Principles and Techniques is an attempt to explain the concepts, principles and techniques of auditing, and their applications in practical situations, in a simple and lucid language. The primary object of writing this book is to meet the requirements of undergraduate students of commerce stream for all the Universities in India. However, this book will also be very useful for the students doing M.Com, C.A., MBA and other professional courses. This book is also useful for a layman who is interested in knowing basics of auditing principles and techniques.

Table of Contents

  1. Cover
  2. Title Page
  3. Contents
  4. Preface
  5. Chapter 1. Nature of Auditing
    1. 1.1 Introduction
    2. 1.2 Origin of the Word ‘Audit’
    3. 1.3 Early History of Audit
    4. 1.4 Auditing Defined
    5. 1.5 Essential Features of Auditing
    6. 1.6 Why Is There a Need for an Audit?
    7. 1.7 Objective of an Audit
    8. 1.8 Errors and Frauds in Accounting
    9. 1.9 Role of Auditors in Detecting Errors and Frauds
    10. 1.10 Relation between Book-keeping, Accountancy and Auditing
    11. 1.11 Basic Principles Governing an Audit
    12. 1.12 Postulates of Auditng
    13. 1.13 Scope and Procedures of Audit
    14. 1.14 Changes in the Concept of Auditing
    15. 1.15 Social Objectives of Audit
    16. 1.16 Advantages of Auditing
    17. 1.17 Limitations of Auditing
    18. 1.18 Qualities of an Auditor
    19. 1.19 Auditing and Other Services
    20. Points to Ponder
    21. Review Questions
  6. Chapter 2. Classification of Auditing
    1. 2.1 Introduction
    2. 2.2 Classification of Audit
    3. 2.3 Classification on the Basis of Organisation
    4. 2.4 Classification on the Basis of Function
    5. 2.5 Classification on the Basis of Practical Approach
    6. 2.6 Classification on the Basis of Audit Dimension
    7. Points to Ponder
    8. Review Questions
  7. Chapter 3. Techniques and Procedures of Auditing
    1. 3.1 Introduction
    2. 3.2 Preparatory Steps before Commencement of Audit
    3. 3.3 Preparation by the Auditor
    4. 3.4 Principles and Techniques of Auditing
    5. 3.5 Procedures Followed in Course of Audit
    6. Points to Ponder
    7. Review Questions
  8. Chapter 4. Internal Control, Internal Check and Internal Audit
    1. 4.1 Introduction
    2. 4.2 Internal Control
    3. 4.3 Internal Check
    4. 4.4 Internal Audit
    5. 4.5 Auditor’s Independence
    6. 4.6 Distinction between Internal Control and Internal Audit
    7. 4.7 Distinction between Internal Check, Internal Audit and Internal Control
    8. Points to Ponder
    9. Review Questions
  9. Chapter 5. Vouching
    1. 5.1 Introduction
    2. 5.2 Concept of Vouching
    3. 5.3 Objectives of Vouching
    4. 5.4 Importance of Vouching
    5. 5.5 Vouching and Verification
    6. 5.6 Vouching and Routine Checking
    7. 5.7 Concept of Voucher
    8. 5.8 Internal and External Evidence
    9. 5.9 General Principles of Vouching
    10. 5.10 Teeming and Lading: A Challenge to Vouching
    11. 5.11 Vouching of Different Types of Transactions
    12. Points to Ponder
    13. Review Questions
  10. Chapter 6. Verification and Valuation of Assets and Liabilities
    1. 6.1 Introduction
    2. 6.2 Meaning of Verification of Assets
    3. 6.3 Meaning of Valuation of Assets
    4. 6.4 Difference between Verification and Valuation
    5. 6.5 Importance of Verification of Assets
    6. 6.6 Importance of Valuation of Assets
    7. 6.7 General Principles for Verification and Valuation of Assets
    8. 6.8 Problems in Verification
    9. 6.9 Problems in Valuation
    10. 6.10 Window Dressing—A Challenge to Verification
    11. 6.11 Verification and Valuation of Assets
    12. 6.12 Verification and Valuation of Intangible Assets
    13. 6.13 Verification and Valuation of Fixed Assets
    14. 6.14 Verification and Valuation of Investments
    15. 6.15 Verification and Valuation of Current Assets
    16. 6.16 Verification and Valuation of Fictitious Assets
    17. 6.17 Verification and Valuation of Contingent Assets
    18. 6.18 Verification and Valuation of Liabilities
    19. 6.19 Verification and Valuation of Fixed or Long Term Liabilities
    20. 6.20 Verification and Valuation of Current Liabilities
    21. 6.21 Verification and Valuation of Contingent Liabilities
    22. 6.22 Events Occurring after the Balance Sheet Date
    23. 6.23 Prior Period and Extraordinary Items and Changes in Accounting Policies
    24. Points to Ponder
    25. Review Questions
  11. Chapter 7. Depreciation
    1. 7.1 Definition of Depreciation
    2. 7.2 Purposes of Providing Depreciation
    3. 7.3 Causes of Depreciation
    4. 7.4 Basis of Charging Depreciation
    5. 7.5 Quantum of Depreciation
    6. 7.6 Distinction between Depreciation and Amortisation
    7. 7.7 Different Methods of Depreciation
    8. 7.8 Depreciation Accounting as per AS-6
    9. 7.9 Accounting Disclosure Requirement
    10. 7.10 Legal Necessity of Provision for Depreciation
    11. 7.11 Provision for Depreciation for Past Years
    12. 7.12 Depreciation on Low Value Items
    13. 7.13 Depreciation on Wasting Assets
    14. 7.14 Change in the Method of Depreciation
    15. 7.15 Auditor’s Duty as Regards Depreciation
    16. 7.16 Legal Views as Regards Depreciation
    17. Points to Ponder
    18. Review Questions
  12. Chapter 8. Reserves and Provisions
    1. 8.1 Concept of Reserves
    2. 8.2 Concept of Provisions
    3. 8.3 Difference between Reserves and Provisions
    4. 8.4 Classification of Reserves
    5. Points to Ponder
    6. Review Questions
  13. Chapter 9. Company Audit
    1. 9.1 Introduction
    2. 9.2 Preliminaries before Commencement of Company Audit
    3. 9.3 Audit of Share Capital Transactions
    4. 9.4 Audit of Debentures
    5. 9.5 Audit of Holding Company
    6. 9.6 Audit of Pre-incorporation Profit
    7. 9.7 Specific Provisions for Accounts in the Companies Act
    8. 9.8 Payment of Interest Out of Capital
    9. 9.9 Special Requirements of Company Audit
    10. 9.10 Company Auditor
    11. 9.11 Special Auditor
    12. 9.12 Branch Auditor
    13. 9.13 Joint Auditor
    14. 9.14 Legal Views on Auditor’s Liability
    15. Points to Ponder
    16. Review Questions
    17. Annexure
  14. Chapter 10. Divisible Profits and Dividends
    1. 10.1 Meaning of Divisible Profit
    2. 10.2 Meaning of Dividend
    3. 10.3 Concept of Profit
    4. 10.4 Profit vs Divisible Profit
    5. 10.5 Principal Determinants of Divisible Profit
    6. 10.6 Companies Act Relating to Payment of Dividend
    7. 10.7 Companies Act Regarding Unpaid and Unclaimed Dividend
    8. 10.8 Payment of Dividend Out of Capital Profit
    9. 10.9 Payment of Dividend Out of Capital
    10. 10.10 General Guidelines for Distribution of Dividend
    11. 10.11 Articles of Association Regarding Dividend
    12. 10.12 Auditor’s Duty as Regards Payment of Dividend
    13. 10.13 Payment of Interim Dividend and the Role of Auditors
    14. 10.14 Legal Views as Regards Dividend
    15. Points to Ponder
    16. Review Questions
  15. Chapter 11. Audit Report and Certificate
    1. 11.1 Definition of Report
    2. 11.2 Definition of Audit Report
    3. 11.3 Value of Audit Report
    4. 11.4 Essentials of Good Audit Report
    5. 11.5 Scope of Audit Report
    6. 11.6 Signing of the Audit Report
    7. 11.7 Contents of Audit Report
    8. 11.8 Companies (Auditor’s Report) Order, 2003
    9. 11.9 Forms of Audit Report
    10. 11.10 Audit Report and Audit Certificate
    11. 11.11 Types of Auditor’s Report
    12. 11.12 Qualified Audit Report
    13. 11.13 Types of Audit Certificate
    14. 11.14 Auditor’s Report and ‘True and Fair View’
    15. 11.15 Specimen of Clean Audit Report
    16. 11.16 Specimen of Qualified Audit Report
    17. 11.17 Legal Views as Regards Audit Report
    18. Points to Ponder
    19. Review Questions
  16. Chapter 12. Audit of Banks
    1. 12.1 Introduction
    2. 12.2 An Overview of Banking Institutions in India
    3. 12.3 Legislation Relevant to Audit of Banks
    4. 12.4 Approach to Bank Audit
    5. 12.5 Stages in Audit of Banks
    6. 12.6 Audit Procedures
    7. 12.7 Advances
    8. 12.8 Income Recognition
    9. 12.9 Bank Audit Report
    10. Points to Ponder
    11. Review Questions
    12. Annexure
  17. Chapter 13. Audit of Insurance Companies
    1. 13.1 Audit of Companies Carrying on Life Insurance Business
    2. 13.2 Audit of Companies Carrying on General Insurance Business
    3. 13.3 Applicability of Accounting Standards
    4. 13.4 Books and Registers to be Maintained
    5. 13.5 Submission of Reports and Returns
    6. 13.6 Audit of Accounts
    7. 13.7 Preparation for the Audit
    8. 13.8 Internal Controls
    9. Points to Ponder
    10. Review Questions
    11. Annexure
  18. Chapter 14. Investigation
    1. 14.1 Introduction
    2. 14.2 Definition
    3. 14.3 Objectives or Purposes of Investigation
    4. 14.4 Features of Investigation
    5. 14.5 Terms of Reference
    6. 14.6 Working Methods
    7. 14.7 Duties of an Investigator
    8. 14.8 Investigation Report
    9. 14.9 Qualities of an Investigator
    10. 14.10 Difference between Investigation and Auditing
    11. 14.11 Types of Investigations
    12. 14.12 Legal Views as Regards Investigation
    13. Points to Ponder
    14. Review Questions
  19. Chapter 15. New Areas of Auditing
    1. 15.1 Introduction
    2. 15.2 Cost Audit
    3. 15.3 Management Audit
    4. 15.4 Human Resource Audit
    5. 15.5 Operational Audit
    6. 15.6 Forecast Audit
    7. 15.7 Social Audit
    8. 15.8 Tax Audit
    9. 15.9 Forensic Audit
    10. 15.10 Environmental (Green) Audit
    11. 15.11 Audit Committee
    12. 15.12 Accounting Standards
    13. 15.13 Auditing and Assurance Standards
    14. Points to Ponder
    15. Review Questions
  20. Chapter 16. Professional Ethics and Misconduct
    1. 16.1 Introduction
    2. 16.2 Meaning of Professional Ethics
    3. 16.3 Meaning of Professional Misconduct
    4. 16.4 Schedules to the Chartered Accountants Act, 1949 Relating to Professional Misconduct
    5. 16.5 Enquiry into Charges of Misconduct of Chartered Accountants
    6. Points to Ponder
    7. Review Questions
  21. Chapter 17. Special Audit
    1. 17.1 Introduction
    2. 17.2 Audit of Charitable Societies
    3. 17.3 Audit of Cinema Halls
    4. 17.4 Audit of Clubs
    5. 17.5 Audit of Co-operative Societies
    6. 17.6 Audit of Educational Institutions
    7. 17.7 Audit of Hotels
    8. 17.8 Audit of Hospitals
    9. 17.9 Audit of Libraries
    10. 17.10 Audit of Nursing Homes
    11. 17.11 Audit of Travel Agencies
    12. 17.12 Audit of College Hostels
    13. 17.13 Audit of Publishing Concerns
    14. 17.14 Concluding Remarks
    15. Points to Ponder
    16. Review Questions
  22. Chapter 18. Audit of Soleproprietorship and Partnership Firm
    1. 18.1 Introduction
    2. 18.2 Audit of Sole-proprietorship Business
    3. 18.3 Audit of Partnership Firm
    4. 18.4 Salient Features of Audit of Accounts of Sole-proprietorship and Partnership Firm
    5. 18.5 Rights, Duties and Liabilities of Auditor of a Sole-proprietorship or Partnership Firm
    6. 18.6 Position of Auditor of a Soleproprietorship or Partnership Firm
    7. 18.7 Reports on Accounts of Individual or Partnership Firm
    8. 18.8 Comparison of Company Audit with the Audit of Sole-proprietorship and Partnership Firm
    9. 18.9 Legal Views as Regards Audit of Individual and Firm
    10. Points to Ponder
    11. Review Questions
  23. Chapter 19. Audit of the Accounts of Government and Public Sector Undertakings
    1. 19.1 Introduction
    2. 19.2 Audit of Public Sector Undertakings
    3. 19.3 Distinction between Audit of Public Sector Undertakings and Audit of Private Sector Undertakings
    4. 19.4 Government Audit
    5. 19.5 Distinction between Government Audit and Commercial Audit
    6. 19.6 Comptroller and Auditor General of India
    7. Points to Ponder
    8. Review Questions
  24. Chapter 20. Auditing in an EDP Environment
    1. 20.1 Introduction
    2. 20.2 General Approach to an EDP-based Audit
    3. 20.3 Computer Installation Review
    4. 20.4 Computer System Review
    5. 20.5 Approaches to EDP Auditing
    6. 20.6 Special Techniques for Auditing in an EDP Environment
    7. Points to Ponder
    8. Review Questions
  25. Annexures
  26. Copyright