Development In Auditing Essay

1220 words - 5 pages

AUDITORS DUTIES & CHARACTERSTICS IN THE CHANGING ECONOMIC ENVIRONMENT

An auditor should act honestly and with reasonable skill and care. If he fails to perform it, he may be sued for the damages. Reasonable skill and care depend upon the circumstances of the case. He should not rely on the arithmetical accuracy of the books but he has to make sure that such books were properly made up to show the results of the operations for a stated period. (Gay and Simnett, 2007)
There were several cases in past where the auditors’ duties and characteristics were laid.
In Kingston Cotton Mills Co. the facts of the case were:-
a. The company was under liquidation and the liquidator took action ...view middle of the document...

The facts of the case were as follows:
a. The company changed the nature of some of its loans and the auditor’s failed to consider the same while planning and carrying out the audit.
b. Auditor failed to obtain the sufficient and appropriate evidence to complete the audit and relied upon the information given by the officers of the company.
c. Inexperienced staffs were employed by the auditors and their work was not properly supervised. (Gay and Simnett, 2007)
In this case judgement of Moffit J laid the following duties for an auditor:-
a. For the conduct of statutory financial audit of the company in order to form an opinion, the auditors have duty to use reasonable skill and care.
b. Auditors have principal duty to check and verify the authenticity of transactions rather than relying on client’s staff and independent sources which may be an aid, but it cannot be substitute to the audit procedures.
c. The audit should cover the whole year.
d. Use of inexperience staff is not negligence but they should be supervised. If the audit failure happens, then the use of such staff can be taken as evidence that audit failure was result of negligence.
e. Auditors have duty to report to the shareholders of the company (Companies Act 1993).But the shareholders are not accessible during the course of audit and in meantime if the auditors come across the matter which is material he is bound to discuss the same with the board of directors or management. Any type of fraud and error shall be communicated to safeguard the interest of the shareholders.
f. Audit plan shall be documented and flexible enough to change if circumstances change during the audit.
g. Reliance can be placed on the internal controls if it is fully effective and so the scope of the audit work can be restricted.
h. Auditors have to extend their audit procedures where it seems necessary to do so.
i. Auditor shall plan the audit in such a way that he can reasonably expect detection of any material fraud and error.
j. Professional standard shall keep on changing according to economic and business and environment. (Gay and Simnett, 2007)
It was observed by the court that, in finding what qualifies reasonable skill, care and caution are guided by professional standards and best auditing practices available at a time. The duties laid down in the various cases have become very useful for practice and the judgement has been adapted in international auditing standards. (Gay and Simnett, 2007)
There are international auditing standards developed by the IAASB, which lays down the standards for carrying out auditing with high standards. Also each county...

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