We will discuss here Objects of Auditing. An audit is a process of verification and/or validation of the fulfillment of an activity as planned and the stipulated guidelines. According to the ISO (International Organization for Standardization) it is an independent and documented systematic process that allows obtaining audit evidence and carrying out an objective.

Key concepts; Objects of Auditing.

1. ACCOUNTING POLICIES

The main object of auditing is to examine the accounting policies. Accounting policies arc needed for preparing the accounting records. The auditor can express his opinion on the accounting policies in the best interest of business.

2. EAIRNESS OF STATEMENTS

One of the most important objectives of audit is to determine the fairness of statements. Auditor examine the books of accounts to know the reliability of financial statements. The financial statement can show true and fair view after auditing.

3. INDEPENDENT OPINION

forming and expression of an independent opinion ol auditor about the accounts of client is an important objective of audit. Auditor gives his opinion whether the accounts are showing True and fair view’ or not.

4. PRESCRIBED LAWS

v Another object of audit is to check that prescribed laws were followed or not in preparation of financial statements. There arc various laws which govern the working of many businesses.

(B) SECONDARY OBJECTIVES

DETECTION OF ERRORS

Unintentional mistakes in financial statements are called errors. The purpose of audit is to detect the following errors.

• . Errors of Commission

When incorrect entries are made in the books of accounts cither wholly or partly, the errors are known as errors of commission. Such errors arc discovered by vouching the purchases with the original invoices.

• Errors of Omission

It means the error in which the transaction has been completely omitted from the records. Such errors can be located through thorough checking.

• Compensatory Errors

Compensatory error means an error which is cancelled by an other error of same amount in the opposite direction. Detection of such errors require a complete and exhaustive preparation on the part of an auditor.

• Errors of principles

These errors are occurred when accounting principles are not strictly followed. Ihe examples of • such errors:

1. To show the revenue expenditures.as capital.
2. Omission of outstanding assets and liabilities..

• Falsification of accounts

This fraud is generally committed by higher management lo show more or less profit. 11 can hg detected with a great difficulty. I his fraud may be committed in following ways:

• Recording next year credit sale in this year.
• Recording of fictitious sales.
• Over or under valuation of stock.
• Charging capital expenditures.

6. PREVENTION OF ERRORS AND FRAUDS

The purpose of auditing is lo prevent errors and frauds. An auditor can put a moral check upon the staff by deleting them. Auditor points out the weak points and offers his suggestions for making improvements/in the management and internal control of the organization.

SATISFACTION OF TAXATION’ OFFICER

The object of audit may be to satisfy the taxation officers. Through audit, tax matters are easily settled.

11. LOAN

• The object of audit may be loan. The management can approach the banks and other money lenders.

12. Profits

The purpose of audit is to check the variations in profits. Business life depends upon the profits. An expert auditor can analyze the fluctuation in profits.

14. PROPER SUPERVISION

The object of audit may be the proper supervision of business) Sometimes owner can not look after the business personally. Audit acts as a check on employees and it saves the owner from losses.

Objects of Auditing: Understanding the Core Purpose

Introduction

When it comes to auditing, it is crucial to understand the objects of auditing as they form the foundation of this vital business process. In this article, we will delve into the main objectives of auditing and why they are essential for ensuring transparency, reliability, and accuracy in financial reporting. So, let’s get started and explore the key objects of auditing!

The Main Objective: Ensuring Financial Accuracy

One of the primary objects of auditing is to ensure the accuracy and reliability of financial statements. Auditors meticulously examine financial records, transactions, and statements to identify any material misstatements or errors. By conducting thorough and independent reviews, auditors provide assurance that the financial statements conform to the relevant accounting standards and accurately reflect the financial position of the organization.

Detecting Fraud and Misappropriation of Assets

Another crucial object of auditing is the detection of fraud and misappropriation of assets. Auditors are trained to identify red flags and patterns that could indicate fraudulent activities within an organization. Through their expertise and professional judgment, auditors play a significant role in uncovering financial irregularities, such as embezzlement or fraudulent reporting. By doing so, auditors help safeguard the interests of stakeholders and maintain the integrity of financial records.

Ensuring Compliance with Legal and Regulatory Requirements

Auditing also serves the purpose of ensuring compliance with legal and regulatory requirements. Organizations are bound by various laws and regulations that govern their financial reporting, such as the International Financial Reporting Standards (IFRS) or Generally Accepted Accounting Principles (GAAP). Auditors thoroughly assess whether the organization has followed these guidelines and report any potential non-compliance. This helps organizations avoid legal implications and maintain trust with regulatory authorities and investors.

Evaluating Internal Control Systems

Auditors also focus on evaluating the effectiveness of an organization’s internal control systems. Internal controls are processes, procedures, and systems put in place by management to safeguard assets, ensure accurate financial reporting, and promote operational efficiency. Auditors assess the adequacy and effectiveness of these controls to identify any weaknesses or loopholes that could potentially lead to errors or fraudulent activities. By providing recommendations for strengthening internal controls, auditors contribute to improved risk management and operational excellence.

Assessing Business Performance and Efficiency

While auditing primarily involves financial statement reviews, auditors also assess the overall business performance and efficiency of an organization. By analyzing financial data, auditors gain insights into the organization’s profitability, liquidity, and solvency. They can identify areas of inefficiencies, such as excessive costs or ineffective resource allocation, and provide valuable recommendations for improvement. This object of auditing helps organizations enhance their financial performance and achieve their strategic goals effectively.

Conclusion

In conclusion, understanding the objects of auditing is crucial to comprehend the significance of this vital business process. Auditors play a pivotal role in ensuring the accuracy of financial statements, detecting fraud and misappropriation of assets, ensuring compliance with legal requirements, evaluating internal control systems, and assessing business performance and efficiency. By fulfilling these objectives, auditors contribute to building trust among stakeholders, maintaining transparency in financial reporting, and facilitating the growth and sustainability of organizations.