CHAPTER-I

1.1 INTRODUCTION

Auditor has to state whether in his opinion and to the best of his information and
according to the explanations given to him, the accounts, give a fair and true view in the case
of the balance sheet, of the state of the company’s affairs as at the end of its financial year
and in the case of the profits and loss account, of the profits and losses for its financial year.
Following guidelines may be laid down in this regard. Every auditor of company shall have a
right to access at all times to the books and accounts and vouchers, whether kept at head
office of company or elsewhere. Auditor is not required to wait for the closing of accounts for
conducting the audit. The words all times means only the normal business hours.
Auditor may require the officers of the company to provide such information as he
may think necessary for the permanence of his duties. It will be obligatory for the officers
of the company to furnish without delay the relevant information to the auditors. Auditor has
to state whether in his opinion and to the best of his information and according to the
explanations given to him, the accounts, give a fair and true view in the case of the balance
sheet, of the state of the company’s affairs as at the end of its financial year and in the case of
the profits and loss account, of the profits and losses for its financial

1.2 OBJECTIVES OF THE STUDY

 The auditor examines the financial statements to satisfy himself about the truth and
fairness of financial position and operating results of the enterprise.
 An auditor should detect such frauds using skill, knowledge, and facts.
 To get more commission.
 Detection of fraud is the main job of an auditor.
 Accounting and management information systems. Financial Reporting. Relevant
national, European and international regulations.
 Management accounting and management control.

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1.3 LIMITATIONS OF THE STUDY

 Auditing is the process of inspecting the books of accounts to authenticate their

accuracy and reliability.
 They all rely on audited accounts to make important decisions.
 During the process of auditing, both errors and frauds are discovered.
 Auditing also helps prevent such errors and frauds.
 It creates a fear of being detected.
 They are under constant scrutiny since they know that the accounts will be audited.

1.4 SCOPE OF THE STUDY

The auditor can determine the scope of an audit of financial statements in accordance
with the requirements of legislation, the audit should be organized to cover all aspects of the
entity as far as they are relevant to the financial statements being audited.
A business entity has many areas of working. A small entity may have few functions
while a large concern has many functions. The auditor has the duty to go through all the
functions of the business. The audit report should cover all functions so that the reader may
know about all the working of a concern.
The auditor should obtain reasonable assurance as to whether the information
contained in the underlying accounting records and other source data is reliable and sufficient
as the basis for preparation of the financial statements. The auditor can use various
techniques to test the validity of data. All auditors while doing the audit work usually apply
the compliance test and substance test. The auditor can show such information in the report.

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 CHAPTER - II

2.1 PROFILE OF THE AUDITOR

Name Accountant :

Year of establish :

Owner :

Address :

Mobile :

Email :

Area of Services :

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2.2 COMPANY PROFILE OF THE AUDITOR OFFICE

K. S. Jagannathan & Co, Chartered Accountants, (KSJ) is a leading accounting firm

rendering comprehensive professional services which include Independent Audit &
Assurance, Foreign Exchange and Regulatory Consulting, Restructuring and Valuations,
Accounting and Corporate Support, Personnel Recruitment, Legal and Secretarial Support
and Management Consulting and Tax Consultancy, Tax Audit and Advice on Indirect Taxes.
KSJ was established in Chennai in 1979. KSJ was founded by late Shri. K.S. Jagannathan, a
pioneer in auditing profession in India.
KSJ is one of the few audit firms in India to be selected for review by the “Peer
Review Board” of the Institute of Chartered Accountants of India, Delhi. The review was
done in the year 2005. The review was conducted successfully and KSJ has been issued
necessary certificate in this regard. This certification gives an assurance that the audit
procedures and processes followed by KSJ are of high standard.
The firm boasts of a very prestigious clientele, which includes corporate houses &
MNC's from across industries and continents, project offices of foreign companies, branches
of foreign enterprises, partnership firms, high net-worth individuals, public charitable trusts
& others.
Engagements for the above clients include audit & assurance services, due diligence
reviews, investigations, advisory services on Foreign Exchange related areas and Legal
Advisory Services besides undertaking certification of foreign exchange remittances, royalty
payments, commission income from foreign principals, export earnings. KSJ undertakes
restructuring and valuations for private sector companies. KSJ's professional work is spread
all over the country and abroad. Within the country, KSJ reaches out not only to the metros
and large cities but even to many remote locations etc.
KSJ clients' have global operations through their Branches / Marketing set-ups in
USA, UK, Far-East, Middle East and Australia, Korea & China. KSJ also helps with
selection and recruitment of top level finance personnel for clients including those requiring
placement abroad.
KSJ clients are diversifying their activities by entering into technical collaborations
with business giants in the world and forming Subsidiary Companies within India and abroad
through Joint Ventures. KSJ assists clients who are inbound investors and outbound investors
in a comprehensive manner. KSJ assists well known Non-Governmental Organizations
(NGOs) in their needs.

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 CHAPTER-III
3.1 ORGANIZATION PROFILE

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3.2 ACCOUNTING & FINANCE DEPARTMENT

An audit department is a unit within a company or organization that is responsible for

evaluating operational procedures, risk management, control functions and governance
processes. Reporting internally to the audit committee of the Board of Directors and to senior
management, the audit department is supposed to be completely objective and receive no
influence or interference from the areas of the company or organization it examines.
The audit department delivers findings from its periodic reviews to management and
the audit committee of the Board of Directors. Most are perfunctory with recommendations
here or there to incrementally improve the business or organization.
ACCOUNTING AUDIT DEPARTMENT
An accounting audit performs a necessary function of assuring that a company not
only is being truthful in its financial reporting but also that the company’s operations are
working as intended. Auditors may work either inside the company, conducting an internal
audit, or for another organization, conducting an external audit.
EXTERNAL AND INTERNAL AUDITORS
External auditors are certified public accountants, or CPAs, who work as
independents of a business or organization, examining the financial statements prepared by
the management of the business or organization. The federal Securities and Exchange
Commission, or SEC, requires companies that are publicly held to have their financial
statements examined by an auditor. The auditor ensures that all statements made in the
company’s financial statements are accurate and truthful. Internal auditors perform similar
tasks of assuring the company’s financial statements are truthful and accurate, but they are
employed by the company being audited.
FINANCIAL AUDIT
The purpose of a finance audit is threefold. First is to confirm that procedures are in
place to govern a business to obtain optimum profit levels. Second is to verify compliance
with all applicable regulatory agencies. And third is to protect all business stakeholders from
risk of fraudulent practices. To that end, all businesses – whether public or private – should
conduct periodic audits to protect their financial security. At a minimum, a fundamental audit
checklist should be used and an audit administered by an unbiased committee from within the
business.

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3.3 SALES AUDIT
The Sales Audit is the comprehensive, systematic, periodic, analysis, evaluation and
interpretation of business environment, objectives, strategies, principles to determine the
areas of problem or opportunities and recommending the plan of action to improve the sales
performance. The auditor generally performs the (strengths, weakness, opportunities, threats)
analysis, in which he analyze the opportunities and threats that exist in the external
environment and have a huge impact on the sales strategy.
The auditor checks the Sales Procedure followed to facilitate the sales. The discounts
or any other promotion scheme offered to the customer should be in line with the company’s
profit objective. Thus, the auditor compares the ideal Sales Procedure as written on the paper
with the actual operations. The quality of the Customer Services offered once when the
product was sold or at times when the problems were encountered. The repurchase of the
product solely depends on the after sales service offered by the company. Thus, the auditor
analyses the performance of the company in terms of its services and give the
recommendations for the improvement.
The Sales Audit may sound a complex term, it is actually quite simple. It is usually
performed by an external auditor with both Sales and Marketing teams and analyzes the
components that make up the sale.
MANPOWER AUDIT
Sales Auditor may check and scrutinize the hiring methodologies of sales reps used
by the company. A complete record of the Salesperson is checked including, background,
references, method of selection, salary, increase or decrease in training programs for the Sales
team and any other component which may be important.
MARKET AUDIT
Market conditions are evaluated by the auditors to determine whether the targets
given to employees are feasible or not and they are compared with market standards and
industry growth rate. This helps to not only determine the feasibility of sales targets but also
helps to determine early bird advantage if any for the company.
SALES PROCEDURES
The auditor then goes on to check Sales procedures employed by the company
including the price, discounts, promotion offers, special offers and ultimately the net profit
margin. This is an elaborate step and requires a detailed analysis by the auditor. The auditor
compares ideal sales.

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 CHAPTER IV

4.1 TAX AUDIT

Tax audit is type of audit that performing by government tax department or tax
authority. Tax audit could be performed as the result of in-compliant found by government
agency or the schedule set by government tax department. Entity need not to invite or engage
with tax authority to come to perform tax audit. They will come by themselves. To minimize
the penalty as the result of tax audit, entity is recommended to follow all the requirement set
by tax law and for those areas that they are not sure, entity should engagement with tax
consulting firm for advising.
Information system audit is sometime called IT audit. This type of audit assess and
check the reliability of security system, information security structure, and integrity of
system. Sometime, financial auditing also require to has IT auditing as now technology is
increasing and most of client’s financial reports are recording by complex accounting
software.
Audit approach also changed due to the changing of management’s approach in
recording and reporting their entity’s financial information. Normally, before relying on
information system (software) that use for producing financial statements, auditor required to
have IT audit team to test and review those information system. This kind of audit also offer
and request separately from financial audit.
4.2 COMPLIANCE AUDIT
Compliance audit is type of audit that check against internal policies and procedures
as well as law and regulation. Law and regulation here we mean the government’s law where
the business is operating. In the banking industry, there are many kind of regulation required
bankers to follow and complying with. Most of the central banks required commercial banks
to set up the complaint review (assessment) or compliance audit to make sure that they are
complying those law and regulation set. Entity may also assign its internal audit function to
review whether entity’s internal policies and procedures are complying and effectively
follow.
Compliance audit is part of the system that use by entity’s management to enforce the
effectiveness of implementation of government’s law and regulation, and entity’s internal
policies and procedures.

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4.3 SPECIAL AUDIT
Special audit is type of audit assignment that normally done by internal auditor. This
is happened when there is the problem/case occurred in the organization like fraud, business
case or others special case. There is fraud occurred in the payroll department and this concern
raise to audit committee or board of director or sometime there is the request from CEO to
have special audit on this areas. Special audit is a bit different from forensic audit as special
audit done by internal staff of entity.
4.4 OPERATIONAL AUDIT
Operational audit is types of audit services that the review is mainly focus on the key
processes, procedures, system, as well as internal control which main objective is to improve
the productivity, as well as efficiency and effectiveness of operation. Operation audit is also
targeted the leak of key control and processes that cause waste of resources and then
recommend for improvement. Operational audit is the part of internal audit and their main
aim is to add value to the business their professional services. Systematic and highly
discipline is also the parts that help to make sure the operational audit add value to the
organization.
4.5 INTERNAL AUDIT
Internal Auditing is an independence, and objectivity consulting service which is
design to add value to the business and improve entity’s operation. It provides the systematic
and discipline approach on evaluating and assessing the risks management, internal control
and corporate governance. Scope of internal audit is generally determine by audit committee,
board of directors or directors that have equivalence authorization. And if there is no audit
committee and board of directors, internal audit normally report to owner of the company.
4.6 EXTERNAL AUDIT
External audit is type of audit service that audit firm provides Assurance Service,
Consultant Service, Tax Service, Legal Service, Financial Advisory, and Risk Management
Advisory. The best examples of external auditing are the services.

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 CHAPTER-V
5.1 CONCLUSION
Auditing is explained as part of the managing a business organization, it is the
independent examination of the company financial reports, this is to assure that the financial
information of the business organization shows true and fair view of the company. The audit
opinion is a relevant element of audit report as presented by the external auditor. Some
aspects affect the independence of an external auditor.
These aspects comprise multiple referrals, size of the firm and advising threat.
Business risk is defined as the primary factors that affect the business organization, especially
those which are operating in the international market. Legal risk, financial risks, economic
risks and declining in the product demand are the examples of the business risk Auditing,
Inherent risk, detection risk, and control risk are the examples of audit risk affecting the
auditor practices.

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