B.Com Part 2 Auditing Subject Prof. Ch. Tanvir Ahmad All important Questions ( Tanvir Academy )

Auditing Subject Prof. Ch. Tanvir Ahmad

Auditing Subject Prof. Ch. Tanvir Ahmad All important Questions ( Tanvir Academy )

Question No. 1  :  Define Audit and what are the objects of an Audit?


              The Word ” Audit ” Has Been Taken from Latin Word ” Audire ” Which Means ” to Listen ” or ” to Hear “. In Old Days , Audits were done by listening arguments of the parties, who maintained the books of accounts.

With the passage of Time Audit became necessary at the end of accounting cycle and declared a statutory requirements in case of public Limited Companies. Proper Rules and Regulation were framed up where by Subject of auditing came into existence.

Dictionary Meaning : 

                 The Word Audit Means ,  

                                                       ” An examination of the accounting record “

    L.R. Dicksee Says ( 1951 ) :
” An examination of accounting records undertaken with a view to establish whether they completely and correctly reflect the transactions to which they purport to relate.”


    According to Spicer & Peglar  ( 1963 ) :

” Audit is an examination of business records by which the auditor is satisfied that the profit and loss account and the balance sheet of a business are prepared according to the legal provisions and they are presenting a true and fair view of the business position.”

American institute of Accounting : 

        A Special committee of the American institute of accountant has defined it in the  following Words : 

” An Examination intended to serve as a Basis for an expression of opinion , regarding conformity with accepted accounting principles, of statements prepared by a corporation of other entity for publication.”

Explanation : 

  We find following key elements of the above definitions:

(1)                       Checking of Accounting Records

(2)                        Comparing Accounting Records and Financial Statements, With evidences, provided ensuring validity of records by an independent opinion.


  1. Primary Objectives
  2. Secondary Objectives
  3. Implied Objectives


Reporting : 

                  The Auditors are required to be appointed under the following provisions of Companies Ordinance 1984 for submitting the report about the accuracy of business accounts at different stages.

(a)    Statutory Report : Section 157(5) :

(B)   Prospectus Report : Section 53(1) :

(c)    Annual Report : Section 255(3) :

(d)   Solvency Report : Section 362(2) : 


(1) Detection & Prevention of Errors: 
ISA Para 4 Says : 

  ” Unintentional mistakes in financial statements are Called errors.”


(a) Clerical Errors: 

Those committed at the initial stage by the clerical staff.

  1. Omissions:
  2. Commission:
  3. Compensatory Errors :
  4. Trial Balance Errors:
(2) Detection & Prevention of Frauds :
ISA Para Says : 

” An intentional act by one or more individuals among Management, Employees or third parties, Which results in a misrepresentation of financial statements is called Fraud.”



(1)  Understatement of Cash Received;
  1. No record of accounts receivables
  2. Less record of accounts receivables
  3. No record of casual sales e.g. scrap, bad debts recovered.
  4. Discount recorded but not allowed
  5. Teeming & Lading : Creating a deficiency in the account of a debtor and concealing it through another deficiency and so on for a short period i .e., Short Banking or Delayed Accounting.
  6. Under casting the receipts of a particular page.
(2 ) Overstatement of Cash Paid :

i. Fictitious payments on forged bills.
ii. Double record of the same voucher by change of date.
iii. Personal expenditure paid out of business  e.g. Utility bills & Entertainment Bills
iv. Over casting the payment side.


(i) Understatement of quantity received.
(ii) Overstatement of quantity issued.
(iii) Less balance of available stock.
(iv) No record of material returned

Complete Solution in PDF File  Click Here to Download 

Tanveer Academy Notes 

Auditing Subject Prof. Ch. Tanvir Ahmad

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