Basic terms in auditing
Que. 1.
Define auditing.
Ans.:
Originally audit means to hear. The term audit is derived from Latin word
‘Audire’ which means to hear. In the primitive stages of audit and expert
persons or persons with high calibers are entrusted with hearing the accounts
from accountants and express their opinion on correctness of accounts.
Que. 2.
State the Prime object of audit.
Ans.: The
prime object of audit was to ensure the correct accounting of cash receipts and
payments there by ensure that no cash has been embezzled.
Que. 3.
What is error?
Ans.:
Mistakes committed by persons in charge of writing books of accounts in
recording day-to-day transactions are called errors. Any mistakes occurring in
the process of recording business transactions are called errors.
Que. 4.
Name the types of errors.
Ans.:
1. Technical or Clerical errors.
2.
Errors of principle.
3.
Compensating Error.
4.
Compensating Errors.
Que. 5.
What is fraud?
Ans.:
Fraud means false material representation or false entry made with prior
knowledge of its falsity or without belief in its truth with a view to defraud
somebody. It is purposeful misrepresentation or deliberate concealment of a
material fact with a view to deceive, cheat or misled somebody.
Que. 6.
What is manipulation of accounts?
Ans.:
Accounts are being manipulated by persons at the helm of affairs. The board of
directors may manipulate the accounts to show either more profit or to show
less profit or to show the financial position much better than actual position.
Que. 7.
What are principles of errors?
Ans.:
Principles of errors means.-recording transaction against the fundamental
principles accounting are called errors of principle.
Que. 8.
What do you mean by duplicating errors?
Ans.: If
the same transaction has been recorded twice it is called a duplicating error.
Que. 9.
What do you mean by compensating errors?
Ans.:
Errors occurred at two places balancing one another are called compensating
errors.
Que. 10.
How cash is misappropriated?
Ans.: Cash
is the main source around which all activities are rotated It is the human
tendency to misuse the opportunities available. All those involved in handling
cash in big business houses may take an undue use of their position and
misappropriate the cash.
The cash
may be appropriate in any of the following ways-
- Omitting
to enter the receipts.
- Receiving
more but recording less.
Que. 11.
What is Errors of Omission?
Ans.:
Errors committed by omitting to record the transactions taken place to business
are called errors of omission.
Que. 12.
Give two differences between book keeping and accounting.
Ans.: Book keeping- 1) It is concerned with
recording of business transactions.
2) Scope
is limited to recording day-to-day business transactions.
Accounting- 1) It is a science providing
principles of book- keeping
2) It is
concerned with preparation of final accounts.
Que. 13.
Give two differences between accounting and auditing.
Ans.: Accounting: 1) It aims is represent
the trading results and financial position of business.
2) It is
involves the preparation of trial balance, profit and loss accounts and balance
sheets.
Auditing: 1) It aims to ensure the accuracy
authenticity reliability and acceptability of accounts.
2) It is
not concerned with analytical and critical examination of books of accounts and
financial statements so as to confirm the true and fair position of business.
Que. 14.
What is the object of statutory audit?
Ans.:
Statutory auditor must be a chartered accountant, where as in case of private
audit the auditor need not be a chartered accountant.
Que. 15.
What is Internal Audit?
Ans.: An
audit conducted by a separate audit department in charge of an experienced
professional supported by assistants is called an internal audit.
Que. 16.
What is External Audit?
Ans.: An
auditor appointed by Joint stock companies to conduct an independent audit is
called an external audit.
 |
| TYPES OF AUDITING |
Que. 17.
What is interim Audit?
Ans.: An
audit conducted in between two annual audits is called an interim audit. An audit
conducted with an object of preparing interim report and declaration of interim
dividend. Interim audit is quite essential for the companies required
announcing their quarterly progress report to share holder and the potential
investing public.
Que. 18.
What is Cash Audit?
Ans.: It
is an example of partial audit. An audit conducted with the sole object of
confirming the correct accounting for all receipts and payments is called cash
audit.
Que. 19.
What is Management Audit?
Ans.:
Review of managerial performance in attaining higher order of organizational
performance in materialising organizational vision, mission, goals and
objectives is called as management audit. Management audit has a vital role in
transforming corporate goals into corporate performance.
Que. 20.
What Special Audit?
Ans.: An
audit conducted under Section 233 A of Companies Act, is called a special
audit.
Que. 21.
What Standard Audit?
Ans.: An
audit conducted as per the predetermined standard of auditing practices so as
to draw a fair inferences from the books of accounts, supporting documentary
evidences and information furnished with regards to reliability and
acceptability of financial statement is called a standard audit.
Que. 22.
What is Balance Sheet?
Ans.:
Audit begins with balance sheet items, covering all transactions effecting
balance sheet items and ending with expression of expert opinion on balance
sheet is called a balance sheet audit.
Your Friend
Smdsohail
Follow me on-
Instagram- Skisohotrends
0 comments:
Post a Comment