Auditing refers to an orderly and impartial investigation of the financial records in order to check its accuracy, uniformity, and uniformity with the government standards. It is mainly meant to give an opinion on the true and fair view of financial statements. Some of the secondary objectives involve the identification of errors or fraud, checking of records and evaluation of internal controls. Auditing is an organized, substantiated process with an output of a formalized audit report. It is usually stipulated by law, particularly with entities and statutory institutions.

Key Points for RAS Mains

What is Auditing?

• Auditing refers to the organized procedure of reviewing books of accounts and other supporting documents of an organization by a third party so as to establish accuracy, uniformity and ability to subscribe with the agreed accounting standards and legal provisions.
• It assists in identifying the mistakes, fraud, and gives an accurate and fair image of the financial position of the business.

Auditing Goals

• Primary Objective:
  • To show an opinion on the true and fair view of the financial statements prepared by the management.
• Secondary Objectives:
  • Error detection and error prevention and fraud prevention.
  • Checking of accounting books and records.
  • Compliance with legal and statutory laws.
  • Analysis of internal control systems as effective.

Features of Auditing

• Process: Auditing is systematic and requires a set procedure which includes planning, performance and reporting.
• Independent Examination: A qualified and separate auditor does its conduct.
• Evidence-Based: The existence of sufficient and adequate audit evidence is presented in the audit findings and opinions.
• Reporting Function: Auditors communicate their opinion in the form of an official audit report.
• Legal Support: In the event of companies and statutory organizations it is obligatory that auditing occur by law.

Scope of Auditing

• The scope of auditing is the amount of the work that is conducted by the auditor. It includes:
  • Role of Books of Accounts: Whitewashing the transactions made in journals, ledgers and final accounts.
  • Assets and Liabilities Verification: Assets and liabilities reported in the balance sheet are actually present and those assets or liabilities that are not reflected are disclosed.
  • Assessment of Internal Controls: Ensuring that the appropriate controlling measures have been put in place to stop fraud and error.
  • Compliance Checking: Checking within the organization to ensure that they conform to accounting regulation, taxation regulation and corporate regulations.
  • Operational Auditing: In contemporary audit, audit of not only the financial inflow and outflow, but also of the operational performance and efficiency.

Conclusion for RPSC

Auditing is imperative when establishing transparency, accountability and trust in any organization in the financial aspect. It prevents fraud and secures compliance to the laws because it checks the records and assesses the controls. Auditing also promotes efficient decision making and performance in the currently competitive world.