Period Audit ordinates Auditors Objectives of the audit

Up to Kings, emperors. People of the state The punishment of the

1700 Churches and the or scribes thieves for the funds
state changing direction.

Protecting assets.

1700 – States, Courts, Accountants Repressing fraud and

1850 and shareholders punishment of the authors
Protecting the assets.

1850 – The state and the Professional Avoiding fraud and errors
1900 shareholders accountants or and attesting the viability of
lawyers the balance sheet.

1940 – The state and the Professionals in Attesting the honesty and
1970 audit and regularity of the historical
shareholders accounting and financial data/
counseling

1970 – The state, the Professionals in Attesting the quality of the

1990 third and the audit and internal control and
shareholders counseling respecting the accounting
norms and the audit norms.

1990+ The state, the Professionals in  

third and the audit and
shareholders counseling The protection against
international fraud
Planning
Honesty

Secrecy

Audit Evidence

Internal Control System

Skill and Competence

Work Done by Others

Working Papers

Legal Framework

Audit Report

Audit is a systematic and scientific examination of the books of accounts of a business;

Audit is undertaken by an independent person or body of persons who are duly qualified for the job.

Audit is a verification of the results shown by the profit and loss account and the as shown by the
balance sheet.

Audit is a critical review of the system of accounting and internal control.

Audit is done with the help of vouchers, documents, information and explanations received from the
authorities.

The auditor must satisfy himself with the authenticity of the financial statements and report that
they exhibit a true and fair view of the state of affairs of the concern.

The auditor must inspect, compare, check, review, scrutinize the vouchers supporting the
transactions and examine correspondence, minute books of shareholders, directors, Memorandum
of Association and Articles of association etc., in order to establish correctness of the books of
accounts.
Systematic and scientific examination
Undertaken by an independent person or body of persons who are duly qualified for the job.
Verification of the results shown by accounting books.
Critical review of the system of accounting and internal control.
Done with the help of vouchers, documents, information and explanations received from the
authorities.
Auditor must satisfy himself with the authenticity of the financial statements and report that they
exhibit a true and fair view of the state of affairs of the concern.

Internal Control

Internal Control comprises of the plan of the organization and all the co-ordinate
methods and measures adopted within a business to safeguard its assets, check
the accuracy and reliability of its accounting data to promote operational efficiency
and to encourage adherence to prescribed managerial policies.

Objectives of Internal Control

Let us now understand the purpose of Internal Control from different points of view.

From Auditor’s Point of View

It is very important from the Auditor’s point of view to study and evaluate the system
of internal control. To obtain an adequate understanding of the internal control
system, that must be tested. The Auditor has to determine whether audit is possible,
if yes, then he should determine the scope of audit.
 Limitations of Internal Control
 Management decision to choose to cost effective control system may
reduce the effectiveness of internal control system.
 There are chances of misuse by a person of authority who is operating on
internal control system.
 Objectives of internal control systems may be defeated by manipulation
of management.
 Since internal control system is involved in routine transactions, irregular
transactions may be overlooked.
 Changes in conditions may affect the effectiveness of internal control
system.