Tally

Share on Facebook

Share on Twitter

Share on LinkedIn

Share on Email

Share More


INTRODUCTION

A calm mind is better focused than a turbulent one. Internal auditor exhibits supremacy with his systematic and a well laid out approach, which offers him clarity and edge in whatever he undertakes. There is no limit on his accomplishments. One can never tie him down for that is the power of his knowledge, proactive thought process and experience.

“An Auditor shall be ready when an accounts officer presents himself for audit; otherwise, he shall be punished”- verses from Kautilya’s Arthasastra {from 2.7.22}

 

Internal Auditing has gained so much importance that conducting it has been made mandatory by regulators for listed and other specified companies.

“ In case a discrepancy is discovered during audit:

a) the official concerned shall pay a penalty if the discrepancy has the effect of either showing a higher actual income of lower actual expenditure [ in both the state being a loser]

b) the official shall keep the difference for himself in the converse case.[where a lesser amount than the one shown by the official is actually due to the state]”

c)  from Kautilya’s Arthasastra {from 2.7.19,20}

 

Internal Audit began in modest manner during the Second World War when organisations found it difficult to maintain operational efficiency and control. Companies appointed special staff (i.e. present day internal auditors) to review operations and report to them. The task assigned to internal auditors varied from routine check on finance and operations to appraisal of financial & operational activities.

Earlier, internal audit was largely voluntary, management appointed internal auditors when they felt the need. With increased complexities in business, frauds and scams internal audit has become essential for most organisations. Be it SEC in United States or SEBI in India, regulators are prescribing mandatory internal audits. The range of activities undertaken by internal audit teams has increased. They cover a whole gamut of operations ranging from review of finance & operations to providing assurance and consulting services.

The history of auditing provides the basis for analyzing the changes that have taken place in the audit objectives and techniques. A significant recent trend is towards increased reliance on internal controls and a decrease in detailed testing. The futuristic auditing process is said to be more of a procedural review together with the analysis of the effectiveness of internal controls, thereby offering a platform for the procedural appraisal of the system in place. Various factors contribute to this development. Rising cost of public accounting, expectations of the users of the financial statements, increasing complexity of the business enterprise and finally the latest developments in the communication and information systems

  

Financial Statements and Accounting Standards

 

Around the year 1600, profit and loss statements and statements of balances began to emerge. These statements were created from the records kept within the double-entry accounting system that Luca Pacioli documented in his writings. The main reason for creating the financial statements was to obtain additional information about the business when merchants and businesses at the time were looking for more money to fund their operations. Surprisingly, the purpose and concepts of financial statements has not changed much since that time.

Businesses continued to evolve and expand over the next hundred years. Soon the United States began conducting business with England. The increase in business transactions, especially between the two countries meant that more information was required about the businesses. In 1845, corporations were established in England. The development of corporations, including investors, stockholders, and involvement by others created the need for more accounting information. This led to the development of accounting standards and laws to ensure corporate officers acted ethically and to provide those involved with the corporation the information they need to make sound business decisions. At the same time, the Industrial Revolution occurring within the United States also required more formal practices and regulations as well as professional standards.

To read full article click here

CA Rajkumar S Adukia


 




Category Audit, Other Articles by - Rajkumar Adukia 



Comments


update