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A Brief Introduction To The Field Of Auditing And Assurance Service

All business entities are governed by certain professional bodies and government authorities to avoid financial mal practices within business organizations as well as to maintain transparency. As a result, there are certain rules and regulations pertaining to all registered business organizations; very specially the quoted companies. Auditing of annual financial statements is such a financial practice that is also a regulation imposed by the government on business organizations. The basic concept of auditing is not to find faults of the organization or to pin point their mistakes. The auditor’s responsibility is to give an opinion on the financial statements that are published. While formulating an opinion, there may be chances to detect any errors or frauds but the objective of auditing is merely not the same. This idea can be simplified by the statement, “to be a watch dog, not a blood hound”.
However, whether regulated by any law enacted in a parliament or not, auditing has its many benefits. It can minimize the information risk to the users of financial information; provide decision makers with unbiased information as well as getting expertise knowledge on the preparation and the verification of information. Auditing is primarily based on a list of assertions that can be named as accuracy, completeness, cut-off, understandability, classification, occurrence, valuation and allocation, existence and rights & obligations. All these assertions should be completed to say that a particular area of the business (e.g. – depreciation of assets) has been properly audited.
It is only a reasonable assurance that can be provided by conducting an audit. The reason for this is that there is a certain level of risk associated with auditing that can be called as inherent limitations. A few can be named as use of selective testing, the fact that most audit evidences are persuasive rather than conclusive, and the inherent limitations that are in internal controls of the organization. Due to all these reasons, auditors can only provide a reasonable assurance on the financial statements and not an absolute (100%) assurance. Any person who is a Chartered certified accountant or a government auditor who has completed a lead auditor course is eligible to work as an auditor for a company. But if the company is quoted or listed in the stock exchange, only a chartered accountant may be eligible to audit its financial statements.
However, a director or an employee of the company, a spouse of such a director or an employee, a person who is a receiver in respect of the property of the company or a body corporate cannot act as auditors of a company irrespective of him being a chartered accountant or a person with a lead auditor course in Dubai.
In the point of view of an audit firm, there are two types of acceptances that need to be done; namely, client acceptance and engagement acceptance. Client acceptance is done to evaluate a new client to the firm; to see if it would create any threat to compliance with fundamental principles. Engagement acceptance is the evaluation of a task appointed to the firm whether from a new client or an existing client.