Auditing

Auditing: Concept,objectives, nature, scope, advantages and limitations;Evolution of auditing practices; Prevention and detection of error with practical dealings(Rectification of Error);Qualities of an Auditor ;Book keeping, accounting & auditing, auditing& investigation;Terms of audit engagement.

• Knowledge and understanding of the organization
• Audit program: Concept, objectives, advantages and disadvantages;Contents of audit program,techniques andpreparation of audit program;Tolerable error, audit risks;Sampling and determinants of sample size
• Audit note books: Objectives, procedures & techniques and contents of audit notebooks;Organization of audit staff: Job description, responsibility assigned and liabilities defined;Types of audit work: continuous audit, periodical audit, interim audit, partial audit,tax audit, cash audit, cost audit, management audit, data processing audit
• Scope of work to be determined;Instruction to the client
• Preparation by the auditor, division of work
• Audit files andaud it working papers

• Internal check: Concept, objective, essential characteristics, advantages and disadvantages;Internal check and internalaudit
• Effects of internal control and internal audit, Auditor’s duties as regard to internal check and internalcontrol;Use/adoption of distinctive ticks
• Routine checking
• Difference in balancing books
• Concept of testchecks, advantage and limitation
• Difference between statutory audit and internal audit 74

• Vouching: Concept, importance and objectives;Vouching of cash transactions,vouching of payments,vouching of receipts, vouching of sales, credit and cash sales
• Internalchecks as regard to cash sales, cashdiscount allowed & retu rn, credit sales, review of internal check system as regard to credit sales
• Saleson approval basis, sales under hire purchases system, goods on consignment, goods sent on package andcontainers, return;Vouching of purchase: cash purchase, internal check as regard to cash purchase,discount received and return, credit purchase, internal check as regard to credit purchase, discountreceived and return.

Capital expenditure, revenue expenditure and deferr ed expenditure;Outstanding expenses and income;repairs and renewals; Prepaid expenses, contingent liabilities and asset.

• Concept and importance of Verific ation & Valuation;Distinction between verification and vouching
• Verification and valuation of assets;Vouching and valuation, Methods of valuation:Valuation of fixed assets, current assets and wasting assets;Auditor’s position as regards to verification an d valuation of assets, Verification of liabilities, capital loansand long-term loans, trade creditors, outstanding liabilities for expenses, bills payable, contingent liabilities
• Confirmation and verification, concept of fair value measurement.

• Concept and causes for depreciation, methods of depreciation;Difference betweenfluctuation and depreciation;Difference between obsolescence and depreciation
• Auditor’s duty inconnectionwith depreciation
• Concept, needs and types of reserve and provision
• Auditor’s duty in connection with different provisions and reserves

• (According to Nepal Company Act and other legislations governing audit) Qualification of an auditor of a company
• Appointment and remuneration of an auditor
• Qualities of anauditor
• Rights and duties of an auditor;Removal of an auditor

• Nature of company audit;Preliminaries before company audit, statutory audit, audit of preliminary expenses, audit of statutory general meetings, review of memorandum of association and articlesof association
• Audit of shares capital: Issue of shares at par, premium and discount, issue of share for otherthan cash, bonus share, calls in arrear and calls in advance, forfeiture and re -issue of forfeited shares,transfer and conversion of shares, alternation of share capital
• Audit of underwriting commission, transferfees, brokerage and commission
• Audit of debentures: Issued at par, discount and premium,redemption of debentures, regular redemption and redemption at par, premium and discount, redemptionthrough purchase in open market, conversion of debentures into shares.

• Concept of profit and divisible profit
• Consequences of incorrect valuation of profit
• Factors affectingdividend-capital profit and revenue profi t, dividend by appreciating assets including intangible assets, losson fixed assets and dividend pre -opening profit and 75 dividend
• Dividend on preference shares: cumulativeand non -cumulative preference shares, unclaimed dividend.

Audit report: Concept and contentof audit report;Types of audit report: statutory report, general report,qualified report, tax audit report;Evaluation of audit evidence, adequacy and appropriate of auditevidence.

• Legal provision regarding liability of an auditor
• Liability of an auditor appointed by a private business concern
• Liabilityof a limited company auditor, civil liability, liability for negligence and misfeasance, criminal liability
• Joint audit:Meaning, liability of joint auditor and branch auditor
• Liability of an honorary auditor
• Auditor’s liability to third party.

• Audit of educational institutions, co -operative societies, charitable institutions, NGO’s and localgovernment bodies
• Audit of partnership firm: concept of partnership firm audit;Procedures to befollowed by a newly appointed auditor
• Audit on behalf of different types of partners
• Performance audit: Concept, objectives and distinction between financial and performance auditing.

• Concept of investigation, difference between investigation and audit, causes for investigation andmethods of investigation, identification of objectives of investigation, formulation of program
• Collection and examination of records and evidence
• Typesof investigation: Investigation on behalf ofincoming partners, prospective shareholders, prospective moneylenders and suspected frauds;Duties andliabilities of an investigator.

• Government audit: Concept, objectives, natures and evolution;Difference between government audit and commercial audit;Internal audit:Concept, objectives and advantages
• Misappropriation and procedure for regularization
• Roles of Comptroller General
• Final audit, audit of expenditure, debts, deposit, remittance and stores, aud it report
• Roles of Auditor General in government audit, and Public Account Committee;Directives ofOffice of Auditor General
• Government auditing standard.

• Establishment ofICAN, Accounting Standard s Board, Auditing Standard Board
• The Institute of Chartered Accountants Act
• Roles of ICAN and AUSB in developing and promulgating auditingstandards
• Certificate of practice, code of ethics
• Auditing Standards:Concept, objectives, importance andrequiremen t of each auditing standards (mandatory, voluntary and exposure drafts)

• Reporting on financial sickness
• Social audit, qualityaudit,environment audit
• Auditing and Assurance 76 Project Work 10 LHs After the completion of fourth year concentration classes the students shall have to prepare and submit a projectwork in the area they have specialized. The subject teachers have to discuss with students on possible topics of theproject work, availability and sources of literature, availability of data, data collection methods, appropriate tools of data analysis etc.