The Scope of Auditing

In the case of sole proprietorship and partnership firm. Where audit of accounts is not compulsory, the scope of audit, if they prefer to audit their accounts, is determined by the terms of contract between the auditor and the concern. It should be clear in the agreement the extent to which the auditor should conduct examination of account and what is required to be done.

Scope of Auditing in Case of Company: 

Where ownership is separated from management where and the owners are interested in the financial statements of the company which provide them the information about the affairs of the company, and as the owners (Shareholders) are not involved in the management of the company ,there has been growing importance of audit to be conducted by an independent, important and competent person. Such competent person is a qualified chartered Accountant who is a professional auditor.

The Government of India, therefore, made it compulsory, on the part of the companies to get their accounts audited by inserting the provisions in the companies Act regarding the audit of accounts by an independent and qualified Chartered Accountant. The legislative measures lead to paper supervision and control by the Government on the Corporate sector under the norms and procedures laid down by the legislation. The legislation has further extended the scope of audit.

Standard Scope of Auditing: 

The Institutes of Chartered Accountants in different countries and the Institute of Chartered Accounts of India have laid down definite standards for preparation and audit of financial statements. The I CA I has issued statements in Standard Auditing Practice (S.A.P.) and accounting of standards which the auditors are required to follow.

Legal Decisions:

Various courts in India and outside have giver decisions from time to time and have laid down statutory obligations for presentation of financial statements and for reporting norms. This has greatly enlarged the scope of duties and liabilities of auditors.

EDP Accounts: 

It has now become a common practice for big business undertaking to maintain computerized accounts and preparing final accounts. The auditor, very often, has to rely upon the computerized accounts. This has given further rise to the new technique to assess and prepare a proper audit plan.

Thus, the scope of audit has enlarged with the social and financial development. Now, the’scope is determined by the provision of Companies Act in operation and standards set by the professional bodies and legal decisions of the courts etc.

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