Continuous Audit

Continuous Audit

The audit that remains continue throughout the financial year is called continuous audit.
Characteristics of Continuous Audit

• The auditor visits the business regularly.
• It is conducted in the large business concern.
• It is conducted through the year.
• Throughout checking is possible.
• It is an expensive audit.
• Audit report is not prerequisite.
• It is used to cover the deficiencies of the business.
• Surprise visits are also possible by the auditor.
• The manager can fix the time.

Disadvantages of Final Audit

Disadvantages of Final Audit

1. Shortage of Time
The auditor has many clients and their financial year ends on the same date. So it becomes very difficult for the auditor to finish the work in time. It is a disadvantages of final audit.
2. Delay in Report
The decisions of the business are made on the basis of the audit report. But this report is made one or two months late. So there is also delay in the making of important decisions.
3. Complete Checking Not Possible
It is very difficult for the auditor to check the each and every entry made in the books of account. He applies only test to save the time. So many mistakes remain untouched.
4. May Misrepresent
There may be also a chance that audit report may not represent the correctness of accounts because each and every transaction is not checked.
5. No Moral Influence
In this audit there is less pressure on the accounting staff. The audit staff comes once in the year. So the employees are not altering in their work.
6. Late Corrections
In this audit the errors are locate at the end of the accounting period. Some way, the corrections of errors are also late. And the entire producer takes more time.
7. Audit Report
The demerit of final audit is that report is not presented in time. It may be submitted one or two months late. The decisions are to be made on the basis of audited accounts.
8. Planned Frauds
In this type of audit, the management has a whole year to think and decide how to make the frauds. So they commit a planned fraud, which is very difficult to find by the auditor.
9. Previous Year Data
Past data is provided to the auditor for audit in this type of business. The errors and frauds are also previous they have no concern with present or future.
10. Thorough Checking
In the final audit there may not be thorough checking. The auditor may select the sampling. In this way the errors and frauds are not located and the purpose of audit dies.
11. Planning for Future
In the final audit the future planning is not prepared in time because audit work start when the accounting work ends. The audit work is completed late and the projected financial statements are also completed late.
12. Delay in Accounting
For the accounting staff it is not possible to prepare the financial accounts just at the end of the year. Due to audit there is delay in finalizing the accounting matters.
13. Monthly Report
If in a business monthly or quarterly report are required. In this type of business the final audit cannot be conducted.
14. Proper Attention
The auditor cannot pay the proper attention towards the audit because he is bound by the fixed time.
15. Proper Decision
As he is bound by the time period he cannot judge the weakness of the business properly and cannot give the proper decisions to workers.
16. Interim Dividend
The business, which conducts the final audit, it is very difficult for him to declare the interim dividend.

Advantages of Final Audit

Advantages of Final Audit

1. Alteration Chances Limited
In the other types of audit the alteration is possible in the audit. But in the final audit the alteration of any type is not possible after the audit.
2. Checking of Complete Record
In the final audit there is complete checking of the books of accounting. He can decide either to check cent percent or by sampling.
3. Advantage for the Shareholders
Final audit serves the shareholders by giving them the most reliable financial information for the investment purpose.
4. Advantage for the Owner
Sometimes the business is so large that even one owner doesn’t know the real position about the business. So final audit throws light on the business position and provides him satisfaction.
5. Convenient or Suitable
Final audit is very suitable for the auditor and client staff. It saves both the parties from continuous disturbance.
6. Saving of Time
In the continuous audit the work of audit is continuous through out the year. It takes a lot of time. But as compare to it final audit takes a very short time. So, in the final audit the time is saved.
7. Legal Demand
Final audit is also helpful in checking either the management has fulfilled the legal requirements or not. The management is bound to fulfill the legal requirement.
8. Economical
Final audit is beneficial for the client. It is not a regular burden on him, because it is conducted only once in a year at the end of the accounting period. So, it gives the maximum benefit with minimum cost.
9. Improves the Efficiency
In this audit the performance of the staff improves due to finding out the weak points of the employees by the auditor by overcome these weakness the staff can improve his efficiency.
10. Submission of Report
About the fairness and correctness of accounts final report is very important for the good will of the company.
11. Staff Duties
In final audit there is no clash of duties between the audit and accounting staff. They performed their work accordingly. The accounting staff remains busy throughout the year in his work and the audit staff his work when the accounting staff ends his work.
12. Convenient for Management
The benefit of final audit is that it is convenient for management as well as for audit staff. The auditor can start and complete the audit at one session. The queries can be cleared on the same day.
13. Minimum Time Period
The time required for final audit is less as compared to continuous audit. The auditors can start and complete many audits. They can raise their income by means of new audit work.
14. Planned Work
The final audit has minimum time. So, the work of audit is completed under planning. An audit programme is maintained which provides the schedule of the working of the audit staff and the principal auditor can control the audit work.
15. Work Continuity
In the final audit the work of audit go through without any break and same way the auditor can be satisfied for the doubt, which raise from his work on the same time.
16. Small Business
The final audit is useful for small-scale business units. The fee charged by auditor is less as compared to continuous work. The small income of business can afford small audit fee.
17. No Relations
The merit of final audit is that it provides no chance to audit staff to develop friendly relation with accounting staff. The accounting staff is not in a position to get undue benefit from audit staff.
18. Full Information
The final audit is useful as it provides full information about business matters. The auditor can take decision on the spot for completion of audit work and submission of audit report.
19. Income of Auditor
This type of audit is also helpful for the auditor. Because this audit saves the time of the auditor and he can conduct many other audit of other business.
20. Information of Client
Final audit serves the shareholder by giving them the most reliable financial information for the investment purpose.
21. Technical Knowledge
According to the law all the companies are bound that a qualified and experienced person who must be a chartered accountant can conduct the audit. He is a qualified person and there are no chances of fraud or errors.
22. Element of Friendship
In final audit there is a short time for the auditor staff. So, in the auditor staff or accountant staff no friendship or soft corners created because their understanding is up to some limits. So there are no chances of fraud created by the both staffs.
23. Beneficial for Client’s Staff
As final audit is conducted at the close of the books of Accounts. The client’s staff is not distributed as in continuous audit. They can easily complete their work and the records are provided at the proper place.
24. Protection
In any business the directors can change the figures according to their interest but the final audit protect the rights of the shareholders by providing them correct information.
25. Guidance
The auditor not only provides the true and fair information but also guide the management how can they improve their accounting systems.
26. Thread of Work
In the final audit there is no interval in the work of auditor and it is carried on till its completion. So the audit staff cannot loose the thread of the work, which is performed by them.
27. Moral Check
In the final audit there is moral check of the person who performed the work. The signatures are specified on that work.

Final Audit

Final Audit

Final audit is also called as the “Balance sheet audit” or the “Periodical audit”. Final audit is started when the books of accounts closed at the end of the year. It is the most satisfactory form of audit from the point of view of an auditor. In this audit there is cent percent checking of the accounts. In case if the business has an effective and proper internal control system. Then the audit sampling is possible.
Characteristics
The following are the main essentials or features or characteristics of the final audit.

• In one session an auditor make only one visit.
• This type of audit can be conducted on both the large and small type of business.
• It is conducted when the accounting period ended.
• In this audit the auditor can do test checking.
• Auditor report is a prerequisite.
• It is conducted to report to shareholders.
• The audit is completed on a short period.

Kinds of Auditing

Kinds of Auditing Continuous Auditor Running Audit
Continuous auditor also known as running audit or detailed audit. In large-scale business it is not possible for the auditor to get the true and fair view about the business in a short time period. So for the purpose of finding the correct information the continuous audit is conducted. Continuous audit is the audit that is conducted throughout the year with the fixed or non-fixed period.
Interim Audit
In normal word Interim means half yearly. It is conducted usually between two annual general meetings and only one time, not in intervals.
Final Audits or Complete Audit or Balance Sheet Audit
Final audit is also called as the Balance sheet audit or the Periodical Audit. Final audit is started when the books of accounts closed at the end of the year. It is the most satisfactory form of audit from the point of view of an auditor. In this audit there is cent percent checking of the accounts. In case if the business has an effective and proper internal control system. Then the audit sampling is possible.

Importance of Auditing

Importance of Auditing

For Business
1. Errors are Located
Auditing is helpful for business. The error can be located through it. The location and correction of error is possible through auditing. The true and fair information about business is available.
2. Frauds are Discovered
Auditing is helpful for business. The discovery of fraud is possible through it. The guilty persons can be held responsible. The auditing accounts show fair about business.
3. Loans Become Easy
Auditing is useful for business. Lenders for granting loans accept the auditor’s accounts. The reputation of borrowers increases due to auditing. Thus auditing accounts help the businessman to expand his activities.
4. Advise about Weakness
Auditing is useful for business. The people can seek advise from auditors. The auditors are professional and they know their work very well. They can spotlight the grey area. It is the duty of the business man to act upon the advise of the auditors.
5. High Moral Values
Auditing is essential for business. There is moral check on the management and other staff. Auditing puts the pressure on the staff of work honestly. There is no pending work so there is less chance of errors and frauds.
6. Tax Payments
Auditing is useful for business, tax authority accept audited accounts for assessment of taxes. There is no further inquiry or investigation from department. The audited accounts lessen the worries of business people.
7. Tax Owners
Auditing is useful for business. The tax authorities accept audited accounts for assessment of taxes. There is no further inquiry or investigation from tax department. The audited accounts lessen the worries of business people.
For Owners
7. Efficiency Improves
Auditing is beneficial for business. The auditing determines the efficiency of employees. The training and qualifies management is an asset for any business. Such management can play dynamic role in framing and implementing the policies.
8. Dispute is Settled
Auditing is essential for business. The audited accounts are helpful to settle the disputes. The audited accounts become the basis of making decisions. The dispute may relate to infringement of patents or trademarks.
9. Planning Becomes Possible
Auditing is helpful for business. The audits accounts present true and fair view of business activities. The facts and figures can be used to prepare budge and estimates for the next years. The projected cash receipts and payments, income statement and balance sheet can be prepared.
10. Improvement of Internal Control
Auditing is helpful for business. The auditor can point out the weakness of internal control system. The business management can take steps to remove these weaknesses. The effective control systems are essential for large-scale business enterprises.
11. Fluctuation in Profits
Auditing is helpful for business. The auditor can make the detailed study to find of fluctuation in profits. There are various reasons for changes in profits. The auditor can determine the true cause of such changes.
12. High Credit Rating
The auditing is beneficial for business. The auditing accounts increase the credit standing of any business house. The lenders can rely on audited accounts for granting credit facility. In fact auditing is a screening test of business entity.
13. Listing at Stock Exchange
The auditing is beneficial for business. The listing of securities at stock exchange is optional. The public limited companies can get registration at stock exchange. Stock exchange management for registration purpose accepts the audited accounts.
14. Shareholders Protection
Auditing is beneficial for owners. The shareholders feel that their rights are protected through auditing. They can know the performance of management. Audited accounts help to determine the value of shares.
15. Partner Satisfaction
Auditing is helpful for partners. The sleeping partner feels satisfaction when there are audited. The managing partners can use business property for their personal benefit. There is moral check on managing partners.
16. Proprietors
Auditing is useful for proprietors. The audited accounts help the sole traders that their business is going on properly. The error and fraud are pointed out auditors. The owners can determine the efficiency of their employees or assistants.
17. Beneficiary
Auditing is valuable for beneficiaries. The auditor of a trust can nominate any person as trustee to look after the property of a trust. Auditing can safeguard the right of beneficiaries. There is a moral check on the trustee to follow the by – laws of trust.
18. Deceased Estate
The auditing is helpful for dependents of decreased person. The audited accounts presents true and fair view of financial statements. The family can rely on audited accounts for distributing the estate of deceased person.
19. Insolvency
The auditing is beneficial for creditors. The audited accounts show true and fair view of state of affairs of sole proprietorship or partnership. The creditor can get their money first and then owners can get refund of capital. The audited accounts help to settle the cases at an early date.
For Government
20. Better Performance of Tax Department
Auditing is beneficial for government. Tax officers accept the audited accounts. The assessment order can be issued without further clarification. There is saving of money and time due to audited accounts. The performance of tax officers is improved.
21. Exact Revenue Amount
Auditing is beneficial for government. The collection of revenue is possible at an early date. The people are allowed to deposit various kinds of taxes. The recovery of income is made at the start of the year. The government can start welfare project on the basis of total revenue collected.
22. Progress of Economy
Auditing is essential for government policies. The true fair view is stated in audited accounts. The stage of economic progress can be determined. The government can take measures to raise the rate of economic growth.
23. Purchase of Private Business
Auditing is helpful for government. The private business houses may not work in favour of general public. The government can take over such business units. The purchase price is decided on the basis of auditing of accounts.
24. Sale of Government Business
Auditing is useful for government. The policy can be framed on the basis of audition accounts. The management comes to know the value of business. The government can sell state – owned unit to private sector. The bid price is settled on audited accounts.
25. Inspectors
The auditing is helpful for government. The auditing accounts show the fair value of all assets. The value of assets. The value of assets is the basis of tax. This issue can be settle through audited accounts. The auditors are experts in their field. They know all methods of property valuation. They can issue certified the government agencies for valuation of property.
For General Public
26. Insurers can Settle Claims
Auditing is essential for insurers. The settlement of fire or marine insurance claims is easy through audited accounts. The policy holders and insurance company can settle actual loss of property.
27. No Loss to Lenders
Auditing is essential for lenders. The banks and other lenders ask the borrowers to submit audited accounts before granting loans. The audited accounts are helpful to check the trust worthiness of customers.
28. Creditor are Protected
Auditing is essential for creditors. They can know the true performance of their debtors. The creditor can accept this promise only when he feels that debtor is reliable businessman. Auditor accounts provide basic information about reliability.
29. Bidders Can Offer High Rate
Auditing is helpful for bidders. Audited accounts provide information about net worth of any business. The people interested in purchasing the business can rely on such information. They know the fair value of business. They can offer reasonable price through open bidding.
30. Better Pay to Employees
Auditing is helpful for employees. They are interests in profits. Auditing accounting prove true and fair view of profit. The employees can demand higher pay, fringe benefits and participating in profits. Audit of accounts with the independent person help the employees to make settlement with the employers.
31. Investors Can Take Decisions
Auditing is helpful for inventors. The audited accounts can be used to calculate value of shares and other securities. The bargains power is given to the people who have money and they want earn income. They can protect their rights through reliable information.

Main Objectives of Accounting

Introduction The main purpose of Auditing or object is to find the opinion of an auditor about the correctness and reliability of accounts and the financial position of the business concern. For this purpose auditor has to check the arithmetical accuracy of the books of account and to find out that whether the transactions entered in the books of account are correct or incorrect. This is done by various methods like inspecting comparing and checking. So all that work that is done by the auditor ensures him that figures are facts.
Main Objectives of Auditing
1. Reporting
The objective of an audit of financial statement is to enable the auditor to express an opinion whether the financial statements are prepared, in all material respects in accordance with an identified financial reporting frame work. The phrases used to express the auditor’s opinion are given a true and fair view or present fair in all material respects, which are equivalent terms.
2. Purpose of Audit
The purpose of audit is to check the proper accounting to policies. For the better accounting system it is necessary to follow the accounting policies. Only by this way we can get the effective result. The auditor’s purpose is to check that accounting policy has been followed or not.
3. Law Which is Prescribed
Another objective of the auditor is to check that the accountant has used the prescribed law. There are so many laws related to working of business. The auditor can indicate whether the proper law has been applied or not.
4. Opinion
The purpose of the audit is to get the correct opinion about the business so for this the auditor should be honest, confident and he must have the ethical standard for his work.
5. True and Fair View
The purpose of the auditing is to determine the correctness of statement. After auditing the financial statement has the correct and true view about the business.
6. Prevention of Errors
The audit is committed for the prevention of errors. These errors can be prevented through internal check also.
7. Detection of Errors
Another purpose of audit is to detect the errors. The auditor uses different ways and means to find your errors.
8. Prevention of Fraud
The prevention of fraud is another purpose of auditing. It consists of the omission of the effect of transaction, recording or transaction without substance etc.
9. Detection of Fraud
The detection of fraud is also the purpose of the audit. It is the responsibility of the management to detect the fraud.
10. Cost Audit
To verify the correctness of cost accounting is the main purpose of the cost audit. The management had a duty to follow the cost objectives in maintaining the records of business transaction.
11. Property Audit
The examination of the proper use of money is the main purpose of the property audit. How and where the money of business is used must be mentioned in this audit.
12. Management Audit
The management audit refers to the audit of the management structure either these are according to the requirements of the business or not. It is a voluntary audit.
13. Tax Audit
Tax audit is conducted to satisfy the income tax officer. This type of audit is conducted to determine the income. Usually the partnership and the sole proprietorship conduct this type of business.
14. Social Audit
The measurement of social performance of the business is the main object of social audit.
15. Profit Verification
Audit is concern to check the profit verification in a business concern. Profit has to main position in any type of business, only the expert auditors can check the fluctuation of the Profit.
16. Admission of Partners
For the admission of the new partner the audit plays an important role. It provides information to new as well as old partner for the settlement of the new terms according to the volume of assets and liabilities.
17. Purchasing Price
For the buyers and sellers of a certain business concern it is necessary to know the real value of the business assets and liabilities. The audit is helpful in finding out the real value of the business.
18. Loan From Lenders
Audit is also very helpful and it is also its purpose to find the value of the assets and liabilities or its financial position. From which the management can approach the banks and all the financial institutions for the loan. Auditor report is a proof for the business concern.
19. Operations
It is a part of social audit. The main purpose is to prevent the misuse of resources.
20. Moral Check
Moral check is in fact or more clearly a psychological check. Its object is to create a fade mind to the staff of the business that after a particular period of time a specific person has duty to check the books of accounts.