Primary Objective of Audit
- Determine whether financial Statements are FREE FROM MATERIAL MISSTATEMENT with REASONBALE ASSURANCE
- FRAME OPINION whether financial statement is as per APPLCIABLE FINANCIAL REPORTING FRAMEWORK
- Make REPORT as per SAs & Findings
Secondary Objective / Incidental Objective
- As material mis-statement can be due to fraud or error, hence, to detect MATERIAL FRAUDS & ERROR with REASONABLE ASSURANCE is secondary or incidental objective.
(Not all frauds & errors – Material Frauds & Errors
Not Just Fraud – Fraud & Error Both
Guarantee to detect – No, Only Reasonable Assurance)
- Propriety of Business Decisions, Efficiency & Effectiveness and Future Viability or give business advisory etc., we focus only on true (reliability) & fair (understandable/ comparable/ relevance as per Applicable FRF) opinion on financial statements.
- But certain rules regulations such as Sec 143(1) / CARO 2016 compels us to comment on propriety of decisions also, so we have to do it as law overrides standards only in these specific cases.
Extension of Objectives
Further Law may impose other responsibilities to give opinion on Internal Financial Controls or to comment whether financial statements are consistent with management report for example sec 143 asks to give opinion on internal financial controls & SA 720 asks to comment if there is inconsistency between financial statements & other documents in annual report.
The London and General Bank Ltd
“It is no part of an auditor’s duty to give advice either to directors or shareholders as to what they ought to do. An auditor has nothing to do with the prudence or imprudence of making loans without security. His business is to ascertain and state the true financial position of the company at the time of the audit and his duty is confined to that.
Case of Kingston Cotton Mills Co
Deep-laid fraud in the accounts, will not be construed as failure of audit, provided the auditor was not negligent in the carrying out his normal work.