Periodical audit is not typically referred to as "Balance sheet audit." Periodical audit refers to the regular and recurring examination of financial records and transactions within an organization to ensure accuracy and compliance with accounting standards and regulations. It includes reviewing various financial statements, not just the balance sheet. Balance sheet audit, on the other hand, specifically focuses on verifying the accuracy of the information presented in the balance sheet.
One of the audit procedures to check the issue of share capital of a newly formed company is to review the "memorandum of association and articles of association." These documents outline the company's structure, objectives, rules, and regulations, including provisions related to the issuance of shares. By examining these documents, auditors can ensure that the issuance of share capital complies with the company's legal and organizational requirements. This helps verify the accuracy and legality of the share capital issuance process.
A vacancy caused by the resignation of an auditor is typically filled by a general meeting of the company. The company's shareholders or members, during the general meeting, have the authority to appoint a new auditor to fill the vacant position. This appointment is usually in accordance with the relevant provisions of the Companies Act and the company's articles of association.
Vouching of the balances of all incomes and expenses accounts is known as vouching of the "Impersonal ledger." Impersonal ledger accounts represent various income and expense categories in an organization's accounting records. Vouching involves verifying the accuracy and authenticity of transactions by examining supporting documents such as invoices, receipts, contracts, and other relevant evidence. Vouching of the impersonal ledger helps ensure that the recorded balances are supported by valid and verifiable transactions.
The auditor of a government company is typically appointed by the Comptroller and Auditor General (CAG) in India. The CAG is an independent constitutional authority responsible for auditing the accounts of government entities, including government companies. This appointment is made to ensure transparency, accountability, and proper financial oversight of government companies.
The main object of the audit of the cash book is to ensure that all receipts and payments have been properly recorded. Auditing the cash book involves verifying the accuracy and completeness of financial transactions related to cash receipts and payments. This helps to detect any errors, omissions, or potential fraud, ensuring that the company's financial records accurately reflect its cash inflows and outflows.
An auditor can be held liable for both civil and criminal actions. Civil liability involves being accountable for financial losses caused by negligence or inaccuracies in audits. Criminal liability arises if auditors engage in intentional fraud or deliberate misrepresentation, leading to potential fines, penalties, and even imprisonment. The extent of liability depends on the jurisdiction's laws and the severity of the auditor's actions.
He owners of a company are called shareholders. Shareholders are individuals or entities that hold shares (ownership units) in a company, entitling them to a portion of the company's ownership, profits, and sometimes voting rights in important company decisions.
The work of one clerk being automatically checked by another clerk is called "Internal check." Internal check is a system of internal control within an organization where different employees or clerks are assigned roles that involve cross-checking each other's work. This helps identify errors, prevent fraud, and ensure accuracy in the company's financial and operational processes.
The most difficult type of misstatement to detect fraud is based on omission of a sales transaction from being recorded.
The use of an audit engagement letter is the best method of assuring the auditor will have access to all books, accounts, and vouchers required for audit purposes. An audit engagement letter is a formal agreement between the auditor and the client (the company being audited). It outlines the scope of the audit, the responsibilities of both parties, and the terms of engagement. By specifying the access to necessary records and documents, the engagement letter helps ensure that the auditor can perform their duties effectively and thoroughly examine the financial information of the company.
Internal auditors are often required to have a background in cost accounting or similar fields because their primary role involves examining the company's financial records, transactions, and processes to ensure accurate reporting of costs, adherence to budgetary controls, and efficient resource utilization. While a cost accountant is specifically mentioned in the options provided, it's worth noting that a chartered accountant or other relevant professional with expertise in auditing and financial analysis could also serve as an internal auditor in some cases. The option "need not possess any professional qualification" is generally not accurate, as internal auditors usually require a certain level of professional expertise and qualification to perform their duties effectively.
Preliminary expenses are the best example of a "fictitious asset." Fictitious assets are those assets that do not have a physical existence but represent certain expenses or losses that have been incurred and need to be written off over a period of time. Preliminary expenses are the costs incurred during the formation of a company, such as legal fees, underwriting commission, and other expenses related to the issue of shares or debentures. These expenses are treated as assets on the balance sheet and are gradually written off over a period of time, as they do not provide direct value in the form of tangible assets.
When at an annual general meeting of a company no auditor is appointed or reappointed, in that case the central government appoints a person to fill the vacancy. This is done as per the provisions of the Companies Act or relevant corporate governance regulations in the respective jurisdiction.
Cost audit under section 233(b) of the Companies Act is advisable. This provision allows for a company to conduct a cost audit of its books and accounts in order to ensure accurate reporting of costs and to identify areas where cost efficiency can be improved. The main objective of a cost audit is to help the management make informed decisions regarding cost control, pricing, and resource allocation. It's important to note that the applicability of cost audit and its advisability can vary based on the size, industry, and regulatory requirements of the company.
Professional skepticism requires that the auditor assume that management is neither honest nor dishonest. This means that auditors should approach their work with an open and critical mindset, neither automatically trusting nor distrusting the management's assertions. They should independently assess and verify the information provided, seeking evidence to support the accuracy and completeness of financial statements. This balanced approach helps auditors identify potential misstatements or irregularities while conducting an unbiased and thorough audit
