Audit Working & Audit Note Book

Definition of Audit Note Book

Audit notebook is a diary on which auditor scribble down all important inquiries to avoid the possibility of unquestioned material facts.
Importance
Justice William throws light on the importance of audit notebook in the following words,
The audit notebook that contained detailed information proved to be very helpful to the auditor in every critical moment.
For preparing the audit report it is very useful for that auditor.
In case of negligence charge against the auditor, but note book good evidence can be presented. It may be also used for future guidance and reference. It also enables to auditor to know that what work his assistant at each audit has done.

Advantages of Audit Note Book

1. Audit Report
The audit notebook is helpful to prepare audit report. The auditor can record the weakness of accounting records. The queries not properly answered are started in the audit report when the auditor is satisfied he can submit a clear report.
2. Staff Honesty
The audit notebook is used to determine the integrity and honesty of audit clerks. The moral and ethical value can be examined through audit work. When a person completes his work in time. Time period auditor can appreciate him. If there is pending work after the expiry of time period, he can be held responsible for it. The audit staff must be honest in his work.
3. Helpful For Memory
The audit notebook is help to keep things fresh in memory. The auditor can read the book on daily basis. He can note the weakness on fingertips. The auditor can retain the data in his memory for a longer period of time. He can ask the management to clear the doubtful points before preparing audit report.
4. Reference
The audit notebook is useful for reference. In future it can provide information to the audit staff. The past data gives an insight into business matters. The auditor can note the changes. He can form an opinion about the changes in the nature and size of the business.
5. New Auditor
The audit notebook is useful for new auditor. They can see the weakness of previous years. The old weak points may not be repeated this year.
6. Court Cases
The audit notebook is helpful to defend an auditor in court cases. The people can go to court of law in order to fix liability for negligence of duty. The audit notebook is a written proof of work performed by an auditor.

Definition of Test Checking

According to Professor Meigs,
“Test Checking means to select or examine a representative sample from a large number of similar items.”
It is clear that test checking is sample checking. The whole data must cannot be examined. The audit staffs can statistical technique to check the facts and figures. A certain percentage of transaction can be selected for through examination. The remaining transactions are supposed as checked.

Essentials of Test Checking

1. Sample
The sample items selected from whole data must be representative. The selection can be made by any method. The entire data must be presented in the form of sample.
2. Last Month
The last month of the accounting year is most important. The items appearing in the last month must be given maximum importance at the time of selecting the sample.
3. First Month
The first month of accounting year provides essentials information. The transactions recorded in the first month must be assigned high weight age in order to select the sample.
4. Surprise Testing
The auditors include the element of surprise in selection of test. The accounting staff must be unaware of test checking so that he should not make arrangement for test checking.
5. Checking Method
The auditor can change his method of selecting the sample. At one time he can one use alternate method. The selection method must be charged in time to time.
6. Every Type of Transaction
The auditor must select every type of transaction in test checking. There is a need to include each type of dealing in the sample.
7. Every Employee
The auditor can select the work of every employee. The test checking can be used to examine the work of all employees in the organization.
8. Through Out The Year
The test checking can be applied to all items appearing in the books through out the year. The recurring items are most suitable for test checking.
9. Cash Book
The cash book entries must not be used for test checking. There is a need of cent percent checking of all cash items appearing in cashbook. The control over cash is essential for efficient business working.

Advantages of Test Checking

Advantages of Test Checking
1. Time Saving
The benefit of test checking is available in the shape of time saving. A simple of items is checked and remaining items are treated as checked. In this way there is saving in time.
2. Less Labour
The test checking is useful for saving in labour. A lot of work requires many clerks for completing the audit. But test checking is used to test few items so there is less labour work.
3. Accurate Books
The test checking is useful to note the accuracy of accounting books and other record. There is a demand of error free books. The test checking is a step in the right direction to prove accuracy.
4. Staff Efficiency
The efficiency of accounting staff improves due to test checking. The weakness of employee is reported to management. The employees try to improve their work by overcoming their deficiencies.
5. Timely Report
The benefit of test checking is that timely report can be submitted to the management. The large number of figures can be checked in short period of time so there is no delay.
6. Many Audits
Test Checking is useful to complete many audits in one year. It saves sufficient time, which can be used to check the books of new clients. The auditor is able to raise more income.
7. Special Attention
The auditor can pay special attention to important matters. Test Checking reduces the labour work on the part of audit staff. There is sufficient time period to settle the important matters.

Disadvantages of Test Checking

1. Errors
The demerit of test checking is that errors are not disclosed by it. In the presence of error true and fair view is not possible. No doubt the location of errors is the duty of management but it effects the audit work.
2. Frauds
The demerit of test checking is that planned frauds may not be disclosed. The fraud discovers is the responsibility of management. The audited accounts cannot show true and fair view when fraud exists in books.
3. Responsibility
The demerit of test checking is that auditor cannot shift his responsibility of management. The errors of fraud can be discovered through cent percent checking. So auditor is responsible for test checking.
4. Report
The auditor report may fail to disclose true and fair view of business matters. After test the auditor signs checking the auditor report. The auditor is responsible for audit report based on test checking.

Routine Checking

The auditors check the arithmetic accuracy of journals and ledgers. It is called routine checking. The purpose is detected the error and fraud of simples nature. The audit staff can check the balance appearing in journal and ledgers. The sub-total and total are examined. The differences are calculated. These balance are transfered from one page to another. The amounts carries forward should be the same. The checking is useful for determine the accuracy of the books of accounts. The accounting staff cannot chance the figures after routine checking. The ledger posting is also tested by means of routine checking. The errors may be locked and frauds may be disclosed by it. The auditor is able to give his opinion about the fairness of the financial statements. The auditor can fix the responsibility of the accounting staff for negligence of duty.

Essentials of Routine Checking

1. Sub-Cast
Sub-Cast is a part of routine checking. Sub-total is possible in accounts matters. The sub-cast must be correct.
2. Casts
Cast is part of routing checking. Total in journal and ledger accounts should be examined for accurate results.
3. Carry Forward
Carry forward is a part of routing checking. The balance of one page can be transfered to the next page.
4. Posting
Posting is a part of routing checking. The entries are posted in to the ledger accounts. Posting must be properly examined.
5. Balancing
Balancing is a part of routing checking. Taking the difference of debit and credit in the accounts is called balancing.
6. Carry Down
The amounts in an account can be transferred to next page. The carry down is a part of routing checking.
7. Transfer
Transfer is part of routing checking. The amount is one accounts can be transferred to another account.

Advantages of Routine Checking

1. Accuracy
The benefit of routine checking is that there is accuracy of accounting books and records. The sub-total, casts and carry forward posting, balancing and transfer are stated as correct.
2. Frauds
Routine checking is useful to checking fraud in the books of accounts. The responsibility lies on the head of management for location of fraud. The management can use this tool to meet its duty.
3. Positive Verification
Routine checking helps to verify positive made in the ledger. The correct posting can provide true and fair view of financial statements. The management can verify posting through it.
4. No Change in Figures
Routine checking is useful to eliminate the alternation of figures. The management can meet its obligation with the help of routine checking. The employees cannot alter figures.
5. Final Checking
The benefit of routine checking is that final checking work is reduced. The final checking become early as major work has already been completed through routine checking.

Disadvantages of Routine Checking

Disadvantages of Routine Checking
1. No Care
The work of routine checking is given to junior employee. They do not consider it as important matter. Therefore the expected result cannot be produced for audit purpose.
2. Fraud
The demerit of routine checking is that planned frauds are not disclosed. The responsibility of fraud lies on head of management. The audited accounts may fail to provide true and fair view.
3. Error
The demerit of routine checking is that errors of principle are not disclosed. The responsibility or error can be placed on the head of management. The audited accounts may fail to provide true and fair view.
4. Monotony
The work is routine checking is boring and time consuming. The clerks go on checking the totals and sub-totals and balances. It does not improve the performance of employee rather it bring monotary.