Various people such as owners, shareholders, investors, creditors, lenders, government etc. uses the final account of a business concern for different purposes. All these users need to be sure that the final accounts prepared by the management are reliable. An auditor is an independent expert who examines the accounts of a business concern and reports whether the final accounts are reliable or not. The term audit is derived from the Latin term “audire” meaning ‘to hear'. In early days an auditor used to listen to the accounts read out by the accountant in order to check them. Auditing is as old as accounting. It was in use in all ancient countries such as Mesopotamia, Egypt, Greece, Rome, U.K. and India. The Vedas, Ramayana, Mahabharata contain references to accounting and auditing. Arthashsastra by Kautilya gives detailed rules for accounting and auditing of public finances. The Mauryas, the Guptas and the Mughals had developed and accounting and auditing system to control state finances. Thus, basically accounting and auditing had their origin in the need for the government to control the income and expenditure of the state and the army. The original object of auditing was to detect and prevent errors and frauds. With increasing number of companies, the companies' acts in different countries began providing for compulsory audit of accounts of companies. Thus in the U.K. audit of accounts of limited companies became compulsory in 1900. in India, the companies act, 1913 made audit of company accounts compulsory. With increase in size of companies the object of the audit also shifted to ascertaining whether the accounts were “true and fair” rather than “true and correct”. Thus the emphasis was not on arithmetical accuracy but on fair representation of financial affairs. The international accounting standards committee and the accounting standards board of the institute of chartered accountant of India have developed standard accounting and auditing practices to guide the accountants and auditors in their day-to-day work.
[...] In the case of all companies, compliance with accounting standards is mandatory under section 211 of the companies act Section 211(3b) provides that where the financial statements of a company do not comply with the accounting standards, the following disclosures should be made in its p&l a/c and balance sheet: The deviation from the accounting standards; The reasons for such deviation; and The financial effect, if any, arising from such deviation. While requiring the companies to comply with the accounting standards, the companies act casts a duty upon the auditor also to examine compliance with accounting standards. [...]
[...] Apart from the audit report on the financial statements, the auditor of a nationalized bank, State bank of India , any of its subsidiary, or a banking company has also to prepare a long form audit report(LFAR).The auditor of the banks is also called upon to give reports and certificates on certain other specified matter Special audit:- In addition to the normal annual audit, a special of the banking company can be ordered by RBI under sec 30(1b) of the Banking Regulation Act. [...]
[...] ‘Rural sector' means any place as per the latest census, which has A population of not more than 5000 A density of population of not more than 400 per square kilometer, and At least 75% of the male working population is engaged in agriculture. Workflow in companies carrying on general insurance business, The auditor needs to obtain a thorough and good understanding of the accounting systems and procedures of the insurance company to assess the reliability and relevance of the accounting records and other source data underlying the financial statements. [...]
[...] the premium collections are credited to a separate bank account and no withdrawals are generally permitted from that account for meeting the general expenditure. As per the policy of the insurance company, the collections are transferred to the or ho. As soon as the insurance policy is issued, an entry is made in the register of policies showing all the relevant details No risk assumption without premium The insurer can assume no risk unless the premium is received. according to section 64vb of the insurance act no insurer should assume any risk in India in respect of any insurance business on which premium is ordinarily payable in India unless and until the premium payable is received or is guaranteed to be paid by; such person in such manner and within such time, as may be prescribed manner. [...]
[...] Really, auditing has come a long way from “hearing” the accounts in the ancient days to using computers to examine computerized accounts of today. BASIC PRINICPALS OF AUDITING: Integrity, objectivity and independence: The auditor should be honest and sincere in his audit work. He must be fair and objective. He should also be independent. Confidentiality: The auditor should keep the information obtained during audit, confidential. He should not disclose such information to any third party. He should, it is said, keep his eyes and ears open but his mouth shut. [...]
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