LIMITATIONS OF AUDITING
What are the limitations of auditing? As we know that audit is the independent examination of financial information of any entity, whether profit oriented or not, and irrespective of its size, or legal form, when such an examination is conducted with a view to expressing an opinion thereon.There are many advantages of auditing but there is also several limitations of auditing. Let’s discuss in detail various limitations of auditing.
IMPORTANT LIMITATIONS OF AUDITING
The most important limitations of auditing are discussed below;-
- FRAUDS BY MANAGEMENT: Auditing fails to verify planned frauds. The management can settle thickly to operate the accounts in order to cover up their inefficiencies. The frauds committed in such circumstances are not revealed. The audited accounts could not show the true and fair outlook.
- WRONG CERTIFICATES: Auditing is based on many certificates taken from management and other persons. The certificates may not provide the true information. Auditing may fail to provide the desired results Auditing. When certificates provide wrong information, the financial statements cannot show correct position.
- MISLEADING CLARIFICATION: Auditing fails to disclose correct information. The background of entries may not be clear to audit staff. The management may not provide correct clarification. The auditor is bound to present his report even of the clarification is not true. The auditing fails to help many persons who rely on the audit report.
- NO TRUE PICTURE: The auditing does not present cent percent true picture. The auditor is concerned with figures shown in the books of accounts, Auditing fails to disclose true picture when figures have been manipulated. The purpose of audit fails when it is unable to depict a real scene of business affairs.
- NO CORRECT VIEW: Auditing fails to present correct view. There are limitations of accounting so figures are not facts. These figures are based on opinion. Moreover, the auditor has to make judgments on various matters. The personal judgments may be wrong in certain cases. Thus auditing is unable to disclose correct view.
- NO SUGGESTION: The audit is conducted to show a fair view of financial statements. Auditing is not concerned with management policies. The auditor cannot guide management for better use of capital. The auditor examines what has been done. He is unable to suggest what should have been done.
- ABSENCE OF HONESTY: The auditing work depends upon various professional and personal qualities of an auditor. Honesty and independence are highly essential traits. The auditor must certify which is true. Management and other parties should not influence him. The absence of honesty and independence means failure of audit purpose.
- BIAS OF AUDITOR: The auditing fails to present fair examination due to the bias of an auditor. It is the superiority of an auditor that he should be independent. The attitude of an auditor is included in audit work when such quality is missing. The biased auditing fails to help many people.
- HIGH COST: The audit work is completed with cost. ‘The cost of an audit should not exceed the cost of errors and frauds, The small-scale business enterprises consider it as a burden on their performance. Auditing fails to serve millions of business entities.
- PAST ACTION: Auditing is nothing more than checking on past activities. It is not concerned with present or future. The audit fee Increases the cost of the business concern.