Auditing-Basic Principles

 

  • Auditing delivers information for organizations to analyze and improve their business performance. Auditing is a work of credibility and responsibility. It requires a set of principles and regulatory measures to make an audit an operative and reliable tool.
  • The following are some of the auditing principles:-

1. Integrity

The audits should be performed with honesty, diligence, and responsibility. It should Observe and comply with applicable legal requirements. It must demonstrate your competency in performing audits. The audit must not be influenced by external factors and thus remain impartial, fair and unbiased in all respects.

2. Fair Presentation

One must ensure audit findings, conclusions, and reports truthfully and accurately reflect the audit activities. Any significant obstacles encountered in the audit must be reported.

Unresolved diverging opinions between the auditor and audit team should be clarified. It should be ensured communication is truthful, accurate, objective, timely, clear, and complete.

3. Due Professional Care

Exercise due care based on the importance of task and confidence placed in you by the audit client. Make reasoned judgments in all audit situations.

4. Confidentiality

Exercise discretion in the use and protection of information acquired during your audit duties.

Do not use audit information for personal gain or in a detrimental way to legitimate interests of the auditor. Properly handle sensitive or confidential information.

5. Evidence-Based Approach

Collect audit evidence that is verifiable. Base the evidence on samples of available information.

Use samples since an audit is conducted during a finite period of time and with finite resources. Sample appropriately to contribute to the confidence that can be placed on audit conclusions.

6. Credit mention

An Auditor is can take the help of work done by others but he should exercise due diligence when referring to it. He should mention the source of reference and give proper credits.

7. System and Process Focus

The ICAI emphasizes a focus on systems and processes, as opposed to transactions and balances, to make the important point that internal audit should be looking to prevent problems, errors, and fraud, not just detect them. That requires conducting root cause analysis as well. This methodology is more sustainable than the one adopted to test transactions and balances as it goes beyond ‘error detection’ to include ‘error prevention.’ It requires a root cause analysis to be conducted on deviations to identify opportunities for system improvement or automation, to strengthen the process, and to prevent a repetition of such errors.

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