OBJECTIVES OF AUDITING

The main objectives of auditing are discussed as follow;-

A ) PRIMARY OBJECTIVES

The Primary objectives of auditing are as below;-

1. FAIRNESS OF STATEMENTS:

The purpose of auditing is to determine the fairness of statements. The financial

statements can show true and fair view after auditing. Due to limitations of financial
statements it is not possible to provide cent percent accuracy, So an attempt is made to
show the fair view of financial statements.

2. PRESCRIBED LAWS:

The purpose of the audit is to check that prescribed laws have been followed in the
preparation of financial statements. There are various laws that govern the working of
many businesses. The auditor can indicate whether the prescribed laws were followed
in the preparation of final accounts.

3. ACCOUNTING POLICIES: The purpose of auditing is to examine the

accounting policies. There is need to follow the accounting policies for preparing
accounting records. The effective accounting system can provide better results. The
auditor can express an opinion on the accounting policies in the best interest of
business.

4. INDEPENDENT OPINION: The purpose of the audit is to express an

independent opinion. The auditor must be honest in his work. Management and other
persons must not influence him There must be high ethical standard for independent
reporting.

B) SECONDARY OBJECTIVES

The Secondary objectives of auditing are as below;-

5. DETECTION OF ERRORS:

The purpose of auditing is to detect the errors. The auditor can use ways and means to
find out errors in the accounting records. It is the duty of management to avoid errors.
The independent audit work is helpful for discovery and correction of errors.
6. DETECTION OF FRAUDS: The purpose of auditing is to detect frauds. The
management is responsible for the detection of frauds. The various types of fraud may
be detected by an audit. The management can take steps to correct the wrong effects of
frauds for the benefit of owners.

7. PREVENTION OF ERRORS: The purpose of auditing to errors. The errors can

be prevented through effective internal check- The mistake can occur due to heavy load
work or carelessness on the part of employees. There should be no extra burden of
work on each employee. The senior person should check the work of a junior person.

8. PREVENTION OF FRAUDS: The purpose of auditing is to Prevent frauds. In

accounting, it includes manipulation or alteration of records and misappropriation of
assets, an omission of the effects of the transaction from records or documents,
recording of the transaction without substance and misapplication of accounting
policies. The effective internal check is a useful tool to prevent frauds.

C SPECIAL OBJECTIVES

The Special objectives of auditing are as below;-

9. MANAGEMENT AUDIT: The purpose of management audit is to assess the

performing, review the organizational structure and suggest the best course of action. It
is a voluntary audit and an audit(h can go through management functions to check the
policies.

10. TAX AUDIT: The purpose of auditing is to satisfy the taxation officers. The can
be conducted to determine the income. The sole proprietors and partnership firms can
settle their tax matters through tax audit

11. SOCIAL AUDIT: The purpose of the social audit is to measure social
performance of the business. The society is concerned with the Protection of natural
environment The social audit can examine the business performance of the society.

12. PROPRIETY AUDIT. the purpose of propriety audit is to examine the proper
use of money. There is a requirement of economic use of resources in the best interest
of business. There must be a justification for spending every rupee for the benefit of
business. The audit can determine the wise use of money.

13. COST AUDIT: The purpose of cost audit is to verify the correctness of cost
accounts. The management must have followed the cost objectives in maintaining
books and other records. The cost audit can help the management to improve the
efficiency in doing business.

14. OPERATIONS; The purpose of operations audit is to prevent misuse of

resources It is a part of social audit The management must use prudence in spending
money. There is need of intelligent use of resources for optimum output with lowest
possible cost.

15. BID OFFER: The purpose of the audit is to determine the real value of the
business forbid offer. The value of net tangible assets becomes the basis of Sales. The
bidders can offer bid price on the basis of such price. The audited accounts serve as a
guideline to arrive at a certain decision.

16. PURCHASE CONSIDERATION: The purpose of the audit is to determine the

purchase price of a business. The audited accounts determine value of assets and
liabilities. The buyers and sellers Come to know the real value of a business. They can
make a deal to amalgamate or merge business.

17. LOAN: The purpose of the audit may be a loan. The management can approach
banks and other lenders. The bankers rely on audited accounts for the supply of money.
The audited accounts are legal requirements of the loan facility.

18. ADMISSION: The purpose of the audit may be an admission of a partner. The
audited accounts can provide information to new as well as old partners. They can
decide terms and conditions for admission. The value of assets and liabilities is agreed
upon.

19. PROFITS: The purpose Of audit may be checking variations in profits. The
fluctuation in profits can be analyzed by an expert auditor. The file of business depends
on reasonable profits.

Objectives of Auditing

Accounts and statements verification

Evaluating the fairness & accuracy of books of accounts is the primary
objective of Auditing. It checks each & every financial transaction thoroughly.
It detects and prevents any frauds in the books of accounts. The auditor is
provided with free hands to audit the books of accounts & is independent of
business.

Checking Accounting Policies

Every business or organisation needs to follow some accounting policies.
Books of accounts are prepared according to these accounting policies. If a
business has an effective accounting system, its efficiency can be increased.
It is the duty of the auditor to check the accounting policies of business &
express his independent opinion.

Error and Fraud detection

Auditing helps in easy finding of errors & frauds from the books of accounts. It
is the duty of management to avoid & check errors & frauds. However,
sometimes it becomes difficult for management to find out the errors.

It is through auditing that helps managers to find out errors & frauds. After this
managers take corrective steps against these errors or frauds.

Improves Quality of Business processes

Auditing helps management in finding out the errors & frauds. Management
can take corrective measures against these errors. Steps are taken so that
they are not repeated again. This way it improves the quality of business
process & improves its efficiency. Also the employees of business work
properly due to the threat of auditing.

Assurance to investors
Auditing assures that each & every figure represented in the financial
statement is correct. It helps in evaluating every figure of business books of
accounts. Financial statements after being audited are considered trustworthy
by investors. Investors are fully assured by these financial statements.

Checking Assets and liabilities

Auditing thoroughly evaluates the financial statements of the business. It
helps in confirming the true value of assets & liabilities of the organisation.
This helps in determining true financial position of the business. After that
accordingly, proper plans can be made to achieve targets & goals.