The Importance Of An Audit

Auditing in Context

Assignment 1

“an audit is an examination of accounting records undertaken with a view to establishing whether they correctly and completely reflect the transactions to which they relate. In some instances, it may be necessary to ascertain whether the transactions themselves are supported by authority.” (Lawrence R. Dicksee, 1907)

1.

(a) Why there is a need for an audit.

Audit is needed for the assurance of companies. More specifically, it is needed to ensure the correctness of all accounts which are related with the business. Moreover, the most important thing is to ascertain if the financial statements (Income Statement and Statement of Financial Position) have been arranged to present the synopsis of transactions for

Audit offers relevance and reliability and provides information concerning profit and loss. However, internal control weakness is solved and expectation gap is minimized. Audit facilitates the sale of business and makes it easier to compare. With audit, goodwill can be increased and loan can be obtained more easily. Furthermore, audit helps to identify and prevent errors and frauds, helps to present a proof and helps to gain remuneration. Also, it helps to keep accounts regularly, to arrange future plan, to evaluate tax and it helps to join up the

Discuss the practical application of the professional code of ethics when undertaking an auditing engagement.

Code of Ethics defines the principles and expectations which rule individuals’ and organizations’ behavior in the performance of internal audit. Moreover, code of ethics characterizes the minimum demands for behavior expectations and not determinate activities. Its aim is to forward, internal auditing, an ethical culture.

“An investigation into how well (or poorly) a company conforms to the ethical standards of its industry or society generally. An ethicsaudit may consider the company's own practices, how it redresses grievances, how it discloses its finances, whether it punisheswhistleblowers, and even the general cultural surrounding its business dealings. Some companies may formally adopt a code ofethics and conduct periodic ethics audits to see how closely they follow their own rules.” (Farlex Financial Dictionary, 2012)

Auditing engagement is a logical insurance engagement in which professional accountants give their point of view whether financial statements have been prepared, if they are presented deservedly and give a true and fair view, according to applicable