1) Objectives of Auditing

A.Primary Objectives
1.  To Examine the Accuracy of the Books of Accounts
An auditor has to examine the accuracy of the books of accounts, vouchers
and other records to certify that Profit and Loss Account discloses a true
and fair view of profit or loss for the financial period and the Balance Sheet
on a given date is properly drawn up to exhibit a true and fair view of the
state of affairs of the business.

2.  To Express Opinion on Financial Statements

After verifying the accuracy of the books of accounts, the auditor should
express his expert opinion on the truthness and fairness of the financial
statements. Finally, the auditor should certify that the Profit and Loss
Account and Balance Sheet represent a true and fair view of the state of
affairs of the company for a particular period.

3.Main Objective
The main objective of auditing is to find reliability of financial position and
profit and loss statements. The aim is to ensure that the accounts reveal a
true and fair face of the business and all of its transactions

4.Judgment
Hence, the main objective of auditing is to form an independent judgment
and opinion about the reliability of accounts and truth and fairness of
financial state of affairs and working results.

B.Secondary Objectives
1.Detection And Prevention of Errors
To notice careless errors, which are quite probable in lack of information.
Some of these include errors of exclusion, while others include
compensation, standards as well as errors of omission.

2.Detection and Prevention of Frauds

To perceive if any organisation member has practised fraud for their
benefit. It could be incorrect utilisation of funds or maintenance of wrong
records. Auditors work towards understanding such fraudulent activities to
prevent them from occurring again.

3.Investigation of BOA
The auditing process involves the investigation of the accurate valuation of
the inventories held by an organisation. It also protects the organisation
from inaccurate valuations made by wrongdoers in their interests.

C.Specific Objectives
1.Journal Entries
Examination of all the journal entries and their verification in detail. The
auditors will request all types of proof to authenticate such entries.
2.Authentication
An auditing team authenticates whether the value of the assets in the
organisation's balance sheet is correctly recorded, i.e. as per its original
price at the time of acquisition.

3.Clarity
The auditing team will seek clarity on all the liabilities and debts which the
organisation claims it has to make. All the obligation claims made by the
enterprise will be investigated and validated.

2) Advantages of Auditing
1.Accuracy Assurance Auditing helps ensure that financial records and
information are accurate and reliable. It involves thorough examination and
verification of financial statements, which can help identify any errors or
inconsistencies.

2.Fraud Detection –
Auditing can also help detect any potential fraud or wrongdoing. Auditors
are trained to look for signs of irregularities, such as unusual transactions
or suspicious activities, which can help uncover fraudulent activities.

3.Compliance Verification
Auditing helps ensure that organizations are complying with laws,
regulations, and internal policies. Auditors review the processes and
procedures of a company to make sure they are following the established
guidelines.

4.Financial Transparency
Auditing promotes financial transparency, as it provides an independent
and objective assessment of an organization’s financial health.
5.Process Improvement
Auditing can also help identify areas for process improvement. Auditors
may provide recommendations on how to enhance internal controls,
streamline operations, and reduce risks, which can help organizations
become more efficient and effective.

6.Moral Check
One of the other advantages of auditing is that the staff and the workers of
the company do not try to steal or defraud the company. They are under
constant scrutiny since they know that the accounts will be audited.

7.Independent Viewpoint
If the auditor is an external auditor, the business can get a second opinion
on their financial statements and their financial standing as well.

8.Stakeholders Confidence
After auditing stakeholders like creditors, investors, banks, debenture
holders etc. can rely on the books of accounts with more confidence. And
so after auditing by an independent authority, the financial statements have
more credibility.

9.Credibility
Auditing provides credibility to the financial statements of a company and
gives confidence to the shareholders that the accounts are true and fair.

10.Helps in maintaining accounts regularly:

Maintenance of all accounts on a regular basis is another major advantage
provided by the auditing process. It keeps a check on the regularity of
account and raises questions if they are not maintained in an adequate
manner.

3) Disadvantages of Auditing
1.Cost Factor
A very thorough and detailed audit would be a costly affair. It is not cost
effective. So the auditor has to limit the scope of his audit and use
techniques like sampling and test checking.
2.Time Factor
Auditors generally work on a very specific timeline. Sometimes this is due
to statutory requirements. This means he has to audit a whole year’s
accounts in a few weeks. Hence insufficient time is one of the main
limitations of auditing.

3.Inconclusive Evidence
Generally, the audit evidence the auditor collects is persuasive in nature,
not conclusive in nature. So there is never cent percent conclusive
evidence in most cases while auditing.

4.Estimation
The auditor cannot measure or comment on the exact accuracy of these
estimates. He has to rely on his knowledge.

5.Rely on experts:
Auditor is dependent on experts of various fields for conducting auditing
process. For acquiring true information regarding the valuation of fixed
assets and contingent liabilities, he needs to approach valuers, engineers
and lawyers.

6.Impossibility of checking all transactions:

Another major drawback of auditing is that it is not always possible to check
each financial transaction of organizations. Some organizations are too big
and have a large number of transaction, where evaluating all of them
become quite an impossible task.

7.Unsuitable for small concern:

Auditing may not be fruitful for small organizations where there are limited
transactions. Their accounts can be evaluated without an audit program.

8.Chances of fraud:
Audit may lead to errors and frauds in a business. Audit staff may perform
their task carelessly and present an inaccurate audit report.

9.Lack of Proper Care and Skill:

Often it is seen that an Auditor does not apply proper care and skill to verify
the books of accounts and take it as a routine matter. As a result, the books
of accounts do not reflect true and fair view of the financial position of the
business
10.Not Preventive:
Audit is a post-mortem examination. The work of audit starts after the
completion of transactions recorded in the books of accounts. Therefore,
audited accounts can prevent the future activities but not the past.

4)Vouching
a.Vouching is a procedure followed in the process of the audit to authorise
the credibility of the entries entered in the books of accounts.
b.It is a precise investigation of the presented documents of the firm by an
auditor to check the correctness and accuracy of such documents.

5)Sources of Vouching
1.Vouching
Vouching involves examining source documents to verify the accuracy of
recorded transactions.

2.Primary sources
Primary sources for vouching include invoices, receipts, and purchase
orders that support recorded expenses and revenues.

3.Bank Statements
Bank statements and canceled checks are used to validate cash
transactions during vouching.
4.Vendor Statements

Vendor statements and confirmations are essential for verifying accounts

payable balances.

5.Sales Order
Sales orders and shipping documents are used to confirm the accuracy of
sales and inventory records.

6.Payroll Records
Payroll records and timecards are sources for vouching employee wages
and related expenses.

7.Loans Agreements
Loan agreements and promissory notes are examined to validate recorded
borrowings and related interest payments.
8.Contracts
Contracts and agreements provide evidence for vouching contractual
obligations and commitments.

9.Inventory Sheets
Inspection of physical assets and inventory count sheets helps validate the
accuracy of recorded inventory balances.

10.Evidences
Supporting evidence from external parties, such as customer confirmations,
can also be used to validate certain transactions.

6) Kinds of Vouching
1. Internal Vouching:
Examining transactions within the organization's accounting records to
validate their accuracy and authenticity.

2. External Vouching:
Verifying transactions by referring to external sources and documents, such
as vendor confirmations or bank statements.

3. Documentary Vouching:
Checking the validity of transactions by examining supporting documents
like invoices, receipts, and contracts.

4. Oral Vouching:
Obtaining verbal confirmations from relevant parties, such as customers or
suppliers, to validate transactions.

5. Test Vouching:
Randomly selecting a sample of transactions for examination to ensure
representative coverage of the financial data.

6. Complete Vouching:
Verifying all recorded transactions in a particular account or period,
ensuring no significant omissions.

7. Tracing:
Following a transaction from its source document to its entry in the
accounting records to ensure proper recording.
8. Cross-Vouching:
Comparing data from different accounting records or sources to identify
discrepancies and ensure consistency.

9. Relevance Vouching:
Focusing on high-risk or material transactions to assess their accuracy and
identify potential errors or fraud.

10. Legal Vouching:

Ensuring compliance with legal and regulatory requirements by verifying
transactions against relevant laws and regulations.

7) Objectives of Vouching
1. Verify Existence:
To confirm the existence of recorded transactions and ensure they are not
fictitious.

2. Authenticate Accuracy:
To validate the accuracy of financial records and ensure they reflect the
true financial position of the organization.

3. Confirm Authorization:
To ensure that transactions were properly authorized by appropriate
personnel or management.

4. Detect Errors:
To identify and rectify any errors or discrepancies in the accounting
records.

5. Uncover Fraud:
To detect any fraudulent activities or misappropriation of assets through
examination of transactions.

6. Assess Completeness:
To ensure that all relevant transactions have been properly recorded and
there are no significant omissions.

7. Comply with Standards:

To verify compliance with accounting principles, standards, and applicable
regulations.
8. Evaluate Internal Controls:
To assess the effectiveness of internal controls and identify any
weaknesses or deficiencies.

9. Establish Audit Trail:

To establish a clear and reliable audit trail from the source documents to
the financial statements.

10. Provide Reliable Information:

To ensure that the financial statements are based on reliable and
trustworthy data, supporting the decision-making process for stakeholders.

8) Importance/Advantages of Vouching
1. Ensures Accuracy:
Vouching helps verify the accuracy of financial records by validating
transactions against supporting documents.

2. Detects Errors:
By examining transactions in detail, vouching can identify errors or
inconsistencies in the accounting records.

3. Prevents Fraud:
Vouching is an effective tool for detecting fraudulent activities or
misappropriation of assets.

4. Validates Existence:
It confirms the existence of recorded transactions and ensures they are not
fictitious.

5. Supports Audit Opinions:

Vouching provides evidence to support the auditor's opinion on the
fairness of the financial statements.

6. Verifies Compliance:
It helps assess compliance with accounting standards, regulations, and
organizational policies.

7. Assesses Internal Controls:

Vouching helps evaluate the effectiveness of internal controls in place to
safeguard assets and prevent errors.
8. Ensures Completeness:
By examining a representative sample of transactions, vouching helps
ensure that no significant transactions are omitted.

9. Establishes Audit Trail:

Vouching establishes a clear and reliable audit trail from the source
documents to the financial statements.

10. Enhances Credibility:

Vouching adds credibility to the audit process and enhances the reliability
of financial information for stakeholders.

9) Audit planning
Audit planning means developing a general strategy and a detailed
approach for the expected nature, timing and extent of the audit.

The auditor plans to perform the audit in an efficient and timely

manner. In simple words, developing an overall strategy for the
effective conduct and scope of the examination.

10) Audit Programme

An audit program, also called an audit plan, is an action plan that
documents what procedures an auditor will follow to validate that an
organization is in conformance with compliance regulations.

The goal of an audit program is to create a framework detailed enough

for any outside auditor to understand.

11) Audit
An audit is an "independent examination of financial information of any
entity, whether profit oriented or not, irrespective of its size or legal form
when such an examination is conducted with a view to express an opinion
thereon.