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Why Auditing Is Necessary

The document discusses accounting and auditing, with several questions and answers provided. It notes that while some small business owners see auditing as a luxury, larger businesses recognize it as important for efficiency, preventing fraud, and shareholder interests.

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1K views15 pages

Why Auditing Is Necessary

The document discusses accounting and auditing, with several questions and answers provided. It notes that while some small business owners see auditing as a luxury, larger businesses recognize it as important for efficiency, preventing fraud, and shareholder interests.

Uploaded by

Riya Das Rd
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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questions

Q) For every business, Accountancy is:

a) Luxury
b) Necessity
c) Symbol of Prestige
d) None of these

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questions

Q) Auditing begins where:

a) Book-keeping ends
b) Accountancy ends
c) Investigation ends
d) None of these

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questions

Q) For a betel shopkeeper, Auditing is:

a) Necessity
b) Luxury
c) Economies
d) Symbol of Prestige

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questions
Q) For Tata Co., Auditing is:

a) Necessity
b) Luxury
c) Economies
d) Symbol of Prestige

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Accounting is necessary
While
Auditing is luxury

According to some businessmen, Accountancy is necessity while Auditing is


luxury. But this statement does not come true and is not acceptable to the
whole community. Those businessmen who are involved in small scale businesses
with little capital accepts this statement but the businessmen who are involved in
large scale businesses with comparatively high amount of capital and employing
more number of employees.

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Accounting is necessary

1. Limited memory power of Human Being


2. Knowledge about the Profit and Loss
3. Knowledge of Economic Position of Business
4. Proof in the Court of Law
5. Need on admission of a new partner
6. Necessity on death and retirement of a partner
7. Helpful for Adjudication as Insolvent

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Accounting is necessary

8. Helpful in the determination of various taxes


9. Safety from Fraud and Forgery
10. Helpful in getting Loans
11. Comparative study of Business
12. Helpful in preparing future plans
13. Helpful in determining the selling price of the business
14. Helpful in getting License

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Auditing is luxury

Opinion of the Small Businessmen


1. More Expensive
2. Alternative Procurement of the Advantages of Auditing
3. Difficulties in Fulfilling the Formalities
4. Wastage of Time
5. Fulfilment of Prestige only
6. Decrease in the efficiency of employees

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Auditing is luxury

Opinion of the Big Businessmen


1. It increases the Efficiency of Employees
2. Less Probability of Fraud
3. Increase in the Efficiency of Management
4. Helpful in the Development of Business
5. Prompt Decision at the time of Insolvency
6. Base of the Future Planning
7. To protect the Interests of Shareholders
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An auditor is an independent critic who certify the correctness and fairness
of Profit and Loss Account and Balance Sheet on the basis of vouchers,
examination and verification. The final accounts of an organisation are
prepared by different persons. The job of an auditor is to thoroughly examine
them. He has to perform this job carefully, intelligently and honestly.
In India, a person who is qualified Chartered Accountant can act as an auditor,
without having this qualifications he cannot be a public auditor.

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1) Knowledge of Book-keeping, Accounting and Auditing.
2) Knowledge about of working of the business.
3) Knowledge of Economics.
4) Knowledge of Audit Case Laws.
5) Technical Knowledge.
6) Knowledge of latest Audit Techniques.
7) Knowledge of Tax Laws.
8) Honesty

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9) Tactful.
10) Secrecy.
11) Impartial.
12) Cautious and Vigilance.
13) Eliciting Information.
14) Prudence.
15) Ability to Prepare Report

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