Q: Principles of audit.

Ans: The principles of audit refer to the fundamental concepts that guide the process of conducting an audit. There are
several principles of audit that auditors are expected to follow:

Integrity: Auditors should be honest and ethical in their conduct and maintain a high level of professional integrity.

Objectivity: Auditors should maintain an objective and impartial attitude during the audit process.

Confidentiality: Auditors should maintain the confidentiality of the information obtained during the audit process.

Professional competence and due care: Auditors should possess the necessary skills and knowledge to perform their
work competently and exercise due care in carrying out their duties.

Independence: Auditors should be independent from the entity being audited and should not have any financial or
other interest in the outcome of the audit.

Evidence-based approach: Auditors should base their conclusions and opinions on reliable and sufficient evidence
obtained through appropriate audit procedures.

Communication: Auditors should communicate their findings and conclusions effectively to the appropriate parties.

Compliance with standards: Auditors should comply with applicable auditing standards and regulations.

These principles help ensure that auditors conduct their work with integrity, objectivity, and professionalism, and
provide reliable and useful information to users of the audit report.

Q: Classification of audit
Ans :Audits can be classified based on various criteria, such as their objective, scope, method, and timing. Here are
some common classifications of audit:

Based on objective:
a) Financial Audit: This type of audit focuses on verifying the accuracy of financial statements and reports, including
income statements, balance sheets, and cash flow statements. The objective is to provide an independent opinion on
the fairness and reliability of the financial information presented.
b) Compliance Audit: This type of audit focuses on evaluating whether an organization complies with laws,
regulations, and policies. The objective is to ensure that the organization is operating in accordance with applicable laws
and regulations.

c) Operational Audit: This type of audit focuses on evaluating the efficiency and effectiveness of an organization's
operations, including its management practices, policies, and procedures. The objective is to identify opportunities for
improvement in the organization's performance.

Based on scope:
a) Internal Audit: This type of audit is conducted by employees of the organization and focuses on evaluating the
internal controls and risk management practices. The objective is to help the organization achieve its objectives by
improving its governance, risk management, and control processes.

b) External Audit: This type of audit is conducted by an independent auditor outside of the organization, and the scope
can include financial audits, compliance audits, and performance audits. The objective is to provide an unbiased and
independent opinion on the accuracy and reliability of the information presented.

Based on method:
a) Substantive Audit: This type of audit focuses on verifying the accuracy and completeness of the transactions and
balances recorded in the financial statements through detailed testing of transactions and account balances.

b) Analytical Audit: This type of audit focuses on analyzing the relationships between different financial statement
items and using statistical techniques to identify anomalies or unusual patterns.

Based on timing:
a) Interim Audit: This type of audit is conducted during the year to assess the organization's performance, internal
controls, and financial statements.

b) Final Audit: This type of audit is conducted at the end of the fiscal year to verify the accuracy and completeness of
the financial statements and reports.

These classifications help to understand the purpose, scope, and methodology of the audit, and they can help auditors
tailor their procedures and approach to achieve the intended objective.

Q: Audit process.
Ans : The audit process is a systematic and structured approach used by auditors to assess an organization's financial
statements, controls, and operations. The audit process typically involves the following steps:

Planning: The auditor will start by identifying the objectives and scope of the audit and develop a plan for conducting
the audit. This includes determining the audit team, assigning roles and responsibilities, and developing an audit
program that outlines the procedures to be followed.

Risk assessment: The auditor will assess the risks that may affect the financial statements, including fraud risks and
control risks, and develop a strategy to mitigate these risks.

Internal control evaluation: The auditor will assess the design and effectiveness of the organization's internal control
system to determine whether it is adequate to prevent and detect errors or fraud.

Testing: The auditor will conduct tests to obtain sufficient and appropriate evidence to support their findings and
conclusions. This may include testing transactions, account balances, and internal controls.

Analysis and evaluation: The auditor will analyze the evidence obtained during the testing phase and evaluate the
results against the audit criteria and objectives.

Reporting: The auditor will prepare a report detailing the findings and conclusions of the audit, including any identified
weaknesses or deficiencies in the organization's financial statements, controls, or operations.

Follow-up: The auditor will monitor the implementation of any recommendations or corrective actions suggested in
the audit report and follow up on any outstanding issues.

Throughout the audit process, auditors should maintain independence, objectivity, and professional skepticism to
ensure the credibility and reliability of their findings and conclusions. The audit process helps to provide assurance to
stakeholders that the financial statements are reliable and accurate, and the organization is operating in compliance
with applicable laws and regulations.

Q: internal check and control

Ans : Internal check and control of audit refers to the procedures and measures implemented within an audit
firm to ensure that the audit process is conducted in accordance with professional standards, and the audit
work is of high quality. Here are some examples of internal check and control procedures that an audit firm
might have in place:
Quality control policies and procedures: An audit firm should have established quality control policies and
procedures that are designed to ensure that the audit work is performed in accordance with the firm's policies
and procedures, as well as with professional standards.

Segregation of duties: An audit firm should have a system of segregation of duties, where different
individuals are assigned to different tasks within the audit process. For example, the person who prepares the
audit workpapers should not also be the person who reviews them.

Peer review: An audit firm should have a peer review process in place, where an independent auditor reviews
the audit work and procedures performed by the audit team. The peer review process helps to ensure that the
audit work is of high quality and meets professional standards.

Training and development: An audit firm should provide ongoing training and development to its audit
staff to ensure that they have the necessary skills and knowledge to perform their work competently and
effectively.

Monitoring and review: An audit firm should have a system in place for monitoring and reviewing the audit
work performed by its staff. This may include regular reviews by senior staff, as well as periodic inspections by
external regulatory bodies.

Ethics and independence: An audit firm should have policies and procedures in place to ensure that its
auditors maintain independence and objectivity throughout the audit process. This may include restrictions on
auditors providing non-audit services to audit clients.

Internal check and control procedures are essential to ensure the quality and integrity of the audit process. By
implementing these procedures, audit firms can reduce the risk of errors and omissions in the audit work, as
well as enhance the credibility and reliability of their audit reports.

Q : Role if Auditor in corporate governance

Ans : The auditor plays a critical role in corporate governance by providing assurance on the reliability and
accuracy of financial information, and by ensuring that the company's internal controls are adequate and
effective. Here are some ways in which auditors contribute to corporate governance:

Independent verification: Auditors provide an independent assessment of a company's financial

statements, which helps to ensure that the financial information provided to stakeholders is reliable and
accurate. This enhances transparency and accountability, which are key components of good corporate
governance.
Evaluating internal controls: Auditors evaluate the company's internal controls to ensure that they are
adequate and effective in preventing and detecting fraud and errors. This helps to protect the company's assets
and promotes accountability and integrity.

Reporting to the board: Auditors report their findings to the board of directors, which helps to ensure that
the board is aware of any significant issues related to the financial reporting process or the company's internal
controls. This enables the board to take appropriate action to address any issues and improve corporate
governance.

Encouraging transparency and accountability: Auditors encourage transparency and accountability by

providing an independent perspective on the company's financial reporting and internal controls. This helps to
foster a culture of accountability and transparency throughout the organization, which is essential for good
corporate governance.

Monitoring compliance: Auditors monitor the company's compliance with laws and regulations, which
helps to ensure that the company is operating in a legally and ethically responsible manner. This contributes to
the company's reputation and enhances stakeholder confidence in the company's operations.

Overall, auditors play a critical role in corporate governance by providing independent assurance on the
reliability and accuracy of financial information, evaluating internal controls, reporting to the board,
encouraging transparency and accountability, and monitoring compliance with laws and regulations. By
fulfilling these responsibilities, auditors help to promote good corporate governance and enhance stakeholder
confidence in the company's operations.