Importance of Auditing

The importance of auditing can be judged from the fact that even those organizations which are not covered by the companies Act get their financial statements audited. It has become a necessity for every commercial and even non-commercial organization. The importance of auditing can be summed in following points:

Audited accounts help a sole trader in knowing the value of the business for the purpose of sale.
Dispute over the correctness of profits can be avoided.
Shareholders, who do not know about the day-to-day administration of the company, can judge the performance of management from audited accounts.
It helps management in detecting and preventing errors and frauds.
Management gets advice on financial affairs from the auditors.
Long and short term creditors depend on audited financial statements while taking decisions to grant credit to business houses.
Taxation authorities depend on audited statements in assessing the income tax, sales tax and wealth tax liability of the business.
Audited accounts are useful for the government while granting subsidies etc.
It can be used by insurance companies to settle the claims arising on account of loss by fire.
Audited accounts serve as a basis for calculating purchase consideration in case of

amalgamation and absorption.

It safeguards the interests of the workers because audited accounts are useful for

settling trade disputes for higher wages or bonus

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Basic Principles Governing an Audit

SA- 200 describes the nine basic principles that govern the procedure of auditing. It lists out the roles and responsibilities of the auditor and his general code of conduct during an audit. 1] Integrity, Independence and Objectivity The auditor has to be honest while auditing, he cannot be favoring the organization. He must remain objective throughout the whole process, his integrity must not allow any malpractice. Another important principle is independence. So the auditor cannot have any interest in the organization he is auditing, which allows him to be independent and impartial at all times. 2] Confidentiality The auditor has access to a lot of sensitive financial information of the organization. It is important that he respect the confidential nature of such information and documents. He cannot disclose any sensitive information to any third party unless it is a requirement by law. And he must also be very careful with documents, certificates etc. that the organ...

Difference between Vouching , Verification and Valuation

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Regional Rural Banks: History, Objective, Function

History- The Regional Rural Banks were established on the recommendations of Narsimha Committee on Rural Credit. The committee was of the view that RRBs would be much better suited than the commercial banks or Co-Operative Banks in meeting the needs of rural areas. Considering the recommendations of the committee the Government of India passed Regional Rural Banks Act 1976. After passing the Act within a year at least 25 RRBs were established in different parts of India. The Regional Rural Banks were established with a view to develop such types of banking institutions which could function as a commercial organization in rural areas. The Regional Rural Banks Act 1976 provide for incorporation, regulation and winding up Regional Rural Banks with a view to developing the rural economy by providing for the purpose of development of Agriculture, Trade, Commerce, Industry and other productive activities in the rural areas, credit and other facilities, particularly to the s...

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