Audit Objective
Audit Objective
Audit Objective
A ) PRIMARY OBJECTIVES
1. FAIRNESS OF STATEMENTS:
2. PRESCRIBED LAWS:
The purpose of the audit is to check that prescribed laws have been followed in the
preparation of financial statements. There are various laws that govern the working of
many businesses. The auditor can indicate whether the prescribed laws were followed
in the preparation of final accounts.
B) SECONDARY OBJECTIVES
5. DETECTION OF ERRORS:
The purpose of auditing is to detect the errors. The auditor can use ways and means to
find out errors in the accounting records. It is the duty of management to avoid errors.
The independent audit work is helpful for discovery and correction of errors.
6. DETECTION OF FRAUDS: The purpose of auditing is to detect frauds. The
management is responsible for the detection of frauds. The various types of fraud may
be detected by an audit. The management can take steps to correct the wrong effects of
frauds for the benefit of owners.
C SPECIAL OBJECTIVES
10. TAX AUDIT: The purpose of auditing is to satisfy the taxation officers. The can
be conducted to determine the income. The sole proprietors and partnership firms can
settle their tax matters through tax audit
11. SOCIAL AUDIT: The purpose of the social audit is to measure social
performance of the business. The society is concerned with the Protection of natural
environment The social audit can examine the business performance of the society.
12. PROPRIETY AUDIT. the purpose of propriety audit is to examine the proper
use of money. There is a requirement of economic use of resources in the best interest
of business. There must be a justification for spending every rupee for the benefit of
business. The audit can determine the wise use of money.
13. COST AUDIT: The purpose of cost audit is to verify the correctness of cost
accounts. The management must have followed the cost objectives in maintaining
books and other records. The cost audit can help the management to improve the
efficiency in doing business.
15. BID OFFER: The purpose of the audit is to determine the real value of the
business forbid offer. The value of net tangible assets becomes the basis of Sales. The
bidders can offer bid price on the basis of such price. The audited accounts serve as a
guideline to arrive at a certain decision.
17. LOAN: The purpose of the audit may be a loan. The management can approach
banks and other lenders. The bankers rely on audited accounts for the supply of money.
The audited accounts are legal requirements of the loan facility.
18. ADMISSION: The purpose of the audit may be an admission of a partner. The
audited accounts can provide information to new as well as old partners. They can
decide terms and conditions for admission. The value of assets and liabilities is agreed
upon.
19. PROFITS: The purpose Of audit may be checking variations in profits. The
fluctuation in profits can be analyzed by an expert auditor. The file of business depends
on reasonable profits.
Objectives of Auditing
It is through auditing that helps managers to find out errors & frauds. After this
managers take corrective steps against these errors or frauds.
Assurance to investors
Auditing assures that each & every figure represented in the financial
statement is correct. It helps in evaluating every figure of business books of
accounts. Financial statements after being audited are considered trustworthy
by investors. Investors are fully assured by these financial statements.