The concept or the vision of auditing has been subject to many changes during the recent eras. In fact, the approach towards auditing as a tool of check seems to have given many definitions in each period. Since the environment is constantly changing, the principles and methods on which the essentials of audit focus need to change, so as to produce robust and efficient results which can be relied upon by all.
As told earlier, an audit is a backdrop where the operations and results of a business are analysed and deviation from the same are addressed. Further, Suggestions for continuous improvement are provided. Hence it is obvious that where such close relationship between business and audit is apparent, the techniques and methodologies of auditing should also be modified to suit the needs of business in order to ensure that the same provides an effective input to the management.
Let us proceed with a simple example-A grocery shop keeper commenced the business with multiple branches with minimum possible capital. When the business prospered, the activities flourished-Sales doubled, Working capital enhanced, Statutory regulations tightened, locations multiplied, business relations widened and the entire business process became complex.
An audit which starts with traditional audit techniques like vouching each and every transaction, casting, tallying and thus computing profit may seem to be satisfactory up to a point of time. Beyond this limit, the entire audit operations become rather stereo-type, consuming much time and eventually resulting to futility. Further, these deteriorate the very essence of an audit.
Hence, it is inevitable that an auditor should assess the scenario, depart from the normal procedures and step up to a higher level which ensures a maximum degree of fruitfulness to the client. The auditor should become more analytical rather than merely comparing raw figures, which convey no meaning unless the same is put into analysis. The concentration is towards full deployment of resources towards providing value-based information to the management by incorporating scientific based models, regression analysis, what-if analysis,
The modern concept is a radical modification of the older concept by eliminating insignificant areas like cent percent verification of Sales invoices, Stock movements etc. An inherent demerit of the above is that there would be some error lying undisclosed or such errors, if any, would be immaterial in relation to the circumstances. Hence, at this juncture, application of modern audit techniques proves to be very much efficient.
By resorting to analytical method of auditing, redundancies are avoided. Thus, accomplishment of one area of check, should correspondingly ensure the other area(s) such that discrepancies shall, readily be identified. Also, the significance of the concept of internal check under the older concept needs to be revised since all of such elements are inter-linked and unified under analytical audit.
The application of Analytical model of auditing requires the following pre-requisites:
- Efficient IT-enabled software
- Powerful database structure
- Secured Audit Trail
- Knowledge-Base incorporating various analytical models and scientific designs
Hence, it is evident that a shift to Information Technology is an indispensable requirement for achieving the benefit of Analytical Audit. In fact, it could create a simplified system that would enable auditor to concentrate on critical areas, which otherwise could have been done manually that may neither be highly-accurate nor perfectly logical.
The change from Traditional to Modern techniques is a vital matter since due to the dynamic nature and expanding volume of business transactions. With regard to the circumstances, the same requires a careful planning coupled with well-trained personnel and infrastructural facilities.
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