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Chapter - 2 Objectives of Auditing

The main objectives of auditing are to verify financial statements and books of accounts, discover and prevent errors and fraud, and protect the interests of shareholders. Additional objectives include acting as a moral check on employees, providing an independent opinion of the business, advising on accounting and finance problems, settling disputes, facilitating loan approvals, and aiding the tax department in tax assessments.

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143 views2 pages

Chapter - 2 Objectives of Auditing

The main objectives of auditing are to verify financial statements and books of accounts, discover and prevent errors and fraud, and protect the interests of shareholders. Additional objectives include acting as a moral check on employees, providing an independent opinion of the business, advising on accounting and finance problems, settling disputes, facilitating loan approvals, and aiding the tax department in tax assessments.

Uploaded by

Ghalib Hussain
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Chapter – 2 Objectives of Auditing

Q. Define Objective of Auditing or Advantages?

Following are the main objects and Advantages of Audit:

1. Verification of Books and Statements:


The main object of audit is verification of the books of accounts and the financial statements
of the company concerned.

2. Discover and Prevention of Errors:


While examining the books, auditors detect some errors. There are various kinds of error so
audit is very useful in preventing and detecting the errors.

3. Discovery and Prevention of Fraud:


Fraud means false representation made intentionally with a view to defraud somebody. It is
the duty of the auditor that he should detect the fraud. So audit main object and advantage is
that fraud may be detected and prevented.

4. Moral Check:
When each staff of the company knows that the auditor will examine his financial
transactions then he fears to do the fraud. The fear of their detection acts as a moral check on
the staff of the company.

5. Independent Opinion:
Auditing is very useful to obtain the independent opinion of the auditor about the business
condition. If the independent auditor audits the accounts, the report of the auditor will be a
true picture and it will be very important for the management.

6. Protects the Interest of Shareholder:


Audits protect the interest of shareholders in the case of “Joint Stock Company”. Through
Audit shareholders are assured that the accounts of the company are maintained properly and
their interest will not suffer.

7. Valuable Advice:
The auditor has expert knowledge about the accounts and finance problems, so he may be
consulted about these problems.

8. Disputes Settlement:
In case of partnership audit very useful in setting the disputes amount the partners. If any
partner dies or retries the audited balance sheet will be very useful in estimating the value of
goodwill.

9. Loan Facility:
If accounts are audited, then the financial institutions will know true picture and they will
never hesitate to lend the money.
10. Useful for Tax Department:
Assessment of tax becomes very easy job for the tax department. Keeping in view the audited
accounts they impose the taxes.

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