Audit and Approaches:
Audit is the official inspection of an organization business
approaches and its financial data by and independent body. There are four
different generally accepted approaches which are as follows.
a)
Balance Sheet Approach:
b)
System-Based Approach:
c)
The Substantive procedures
approach:
d)
Risk based approach:
The details of these approaches are as follows:
a)
Balance Sheet
Approach:
The balance sheet is the very important part of the financial data
recording. Its helps the user of the data to get the information about the company
performance on its assets, equity and liabilities usage.
According to this approach the auditors make their focus on the limited
procedures and put their complete efforts to abstract the use able information
form the balance sheets accounts and their transacted figures data and on the
basis of this information they make their test and verify the complete business
transitions through that way they can also check the internal and external
check and use of the cash and accrual accounting transactions.
b)
System-Based
Approach:
System- Based approach is very use full for the internal auditors and to
check those areas where the organization rules and system need some more
efforts. In short words the approach focus on those areas where it considered
system objectives will be met. The concept is very effectively explained in the
book of CMA-USA Part-1 by the author Gleim.
c)
The Substantive
procedures approach:
In this approach the auditors target on large volumes of transactions and
account balances and also on those areas of the accounting transaction where
they think that there is some especial focus put by the company staff and personals.
d)
Risk based approach:
According to this approach the auditors focus on the daily business
operations and give more focus to those areas
where they fell that there is some kind of risk involve in them. Like the
financial statements key areas which have some risks and some business operations
areas which are full of risks.
That
approach is based on risk and all the financial statements risks, rules and regulations
laws breaching risks and data risk areas also involve in it.
These are the approaches which helps the auditors to conduct
the audit of a business venture or a business unit.
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