What are the Principles of Auditing? As we know that Auditing Standards is quality of work that can be used to measure the performance of auditors. let’s discuss in detail various principles of auditing.
PRINCIPLES OF AUDITING
The important Principles of Auditing are as under;
1. INTEGRITY: The auditor is straight of mind, honest and sincere in his approach. He must be fair toward his work. The auditors are known for their discretion and tactfulness. The loyalty toward his work and profession must be beyond doubt.
2. OBJECTIVITY: The auditor must be fair towards his work. He cannot allow pre-juice and bias to avoid the purpose of Audit. He can protect the rights of shareholders through this principle.
3. INDEPENDENCE: The auditor maintains an impartial attitude. He should be and appear to be free of any interest. No doubt he receives fee from his client even then independence is essential. His personal vision must not be incorporated in his report.
4. CONFIDENTIALITY: The auditor can preserve confidentiality of information acquired in the route of his work. He should not reveal any information to a third party without the exact authority. He can give facts and figures to others under legal or professional duty.
5. SKILL: The auditor must get hold of skill of doing audit work. He must get training from his principal. The experience of all necessary audit steps must be obtained. It is a phase of learning by doing. This skill will assist him when he becomes an independent auditor.
6. COMPETENCE: There is need of best training in the field of audit. A competent person has the right to sign audit report. The practical knowledge and training with expert firm of auditors can make the trainee competent.
7. WORK PERFORMED BY OTHERS: The auditor can rely on the work of other auditors. The sole duty lies on the head of principal auditor who is depending upon the work of the others. The information is available for reliance on others.
8. DOCUMENTATION: The auditor can .document matters that are important in providing evidence that the audit was carried out in accordance with the basic principles. The working papers are prepared at the time of audit. The auditor as proof of audit work can keep these papers.
9. PLANNING: The auditor should plan his work in an efficient manner. The audit planning includes accounting system, internal control procedure and degree of reliance on internal control. The nature, timing and extent of audit procedures to be performed are part of planning.
10. AUDIT EVIDENCE: The auditor can collect audit evidence through working papers. He can frame an opinion based on audit evidence. The principle states the nature and source of audit evidence. The methods to be used are also stated.
11. ACCOUNTING SYSTEM: It is a of tasks in an entity by which transactions are processed for maintaining financial record, This system should recognize, calculate, clarify, post, summarize and report transactions.
12. INTERNAL CONTROL: internal control means all measures used within an organization to assure management that the organization is operating in accordance with plans and policies of management.
13. AUDIT CONCLUSION: The auditor can draw conclusion based on the evidence obtained from the books and records. He can communication that the accounting policies have been followed, financial information relates to legal requirements, the financial statement show the associations of business and the confession has been made as required.
14. REPORTING: The auditor can report on matters relating to business functions. A report may be short or detailed. It may be conditional or unconditional. There may be disclaimer or adverse opinion relating to business activities.
15. DISCLOSURE: The facts and figure are disclosed for general information. The auditor can note that financial information has been presented in full and all disclosure formalities are complete.
16. CAPITAL OR REVENUE: According to the nature of business the accounting staff can record the item as capital or revenue. The wrong allocation cannot provide the true information. The auditor must know the real position of each item in order to report the matter.
17. COMPLIANCE WITH LEGAL FORMALITIES: The rules and regulations must be applied in order to protect the rights of interested parties. The business activities can run on sound lines through compliance with law.
18. CONSISTENCY: The consistency is an auditing principle. The accountant has the right to select the rate of depreciation, provision for bad debts and valuation of stock. He must follow these rates for the years to come. The changes are not acceptable at all.