There has been a tremendous increase in the scope of audit during the last 50 years. During this period several new concepts of audit have been introduced, namely Cost Audit, Management Audit, Tax Audit, Social Audit and Operations Audit. The scope of audit is rapidly changing with the passage of time. In the beginning scope of audit was confined to detection of errors and frauds. Now the auditor has to determine the truth and fairness of the Financial statements along with the detection of errors and frauds. Instituted of Chartered Accountants of India (ICAI) has been issuing statements and pronouncements from time to time on Standard Accounting and Auditing Procedures/practices.
Besides, International Federation of Accountants and International Accounting Standard Committee have also been issuing statements and pronouncements from time to time. These have greatly increased the scope of auditing. Guidelines issued by SEBI have further increased the scope of audit work by auditors. The decision in the famous case of Kingston Cotton Mills, that it is no part of auditor's duty to take stock does not hold good in the present day scenario.
The Manufacturing and Other Companies (Auditor's Report) Order, 1998 and the Companies (Auditor's) Report Order 2003 requires the auditor to comment on the actual physical verification of stock year and the adequacy of the procedures adopted for physical verification etc. The scope of statutory audit is determined by the statue. It cannot be curtailed by an agreement. As far as the scope of other class of audit is concerned it will depend upon the particular type of audit. The scope of Cost Audit will be to check the cost records and adherence to the cost accounting plan. Similarly the scope of Operations audit is to evaluate the existing operations of the organisation to improve their efficiency. In case of voluntary audit the scope of audit can be mutually agreed upon. An auditor cannot be held liable for any error or fraud if it is outside the agreed scope of audit examination. Hence, auditing, in present times and times to come ahead will be a key factor in business arena and with an expansion in the scope of audit, with amendments and revision of laws governing corporate culture the role of an auditor will be ever more.
Ashish Sharma B.Com.(Hons.)