Auditor’s Audit: Meaning, Objectives, Process & Responsibilities

Table of content

An Auditor’s Audit refers to the process through which an auditor examines, evaluates, and verifies an organization’s financial statements, records, and internal controls. The purpose of the auditor’s audit is to ensure that the financial statements present a true and fair view of the company’s financial position and performance.

The audit is conducted in accordance with established auditing standards, accounting principles, and legal requirements, providing stakeholders with confidence in the reliability and accuracy of the reported financial information.

What is an Auditor’s Audit?

An auditor’s audit is an independent examination of an entity’s books of accounts and financial transactions. The auditor, being an independent professional, applies audit procedures to obtain sufficient and appropriate audit evidence before forming an opinion on the financial statements.

This audit helps detect material misstatements, whether arising from fraud or error, and ensures compliance with applicable laws and accounting standards. The process culminates in the issuance of an audit report, expressing the auditor’s opinion on the financial statements’ truth and fairness.

Objectives of an Auditor’s Audit

The auditor’s audit aims to ensure transparency, accountability, and compliance in the organization’s financial reporting process. The objectives can be broadly classified into primary and secondary categories.

Before listing them, it’s important to understand that these objectives guide the auditor’s work from planning to reporting.

Primary Objectives

To verify the accuracy and completeness of the financial records.
To determine whether the financial statements show a true and fair view.
To detect and prevent errors and frauds.
To ensure compliance with statutory requirements and accounting standards.
To express an independent audit opinion on the financial statements.

Secondary Objectives

To assess the effectiveness of internal control systems.
To suggest improvements in accounting and control procedures.
To assist management in decision-making through verified information.
To ensure proper use of resources and detect inefficiencies or waste.

Scope of an Auditor’s Audit

The scope of an auditor’s audit defines the extent and boundaries of the auditor’s responsibilities and work. It depends on statutory requirements, engagement terms, and professional standards.

The following table highlights the main areas generally covered under the scope of an auditor’s audit.

Area of Audit	Description
Verification of Accounts	Examining books of account, vouchers, and supporting documents.
Evaluation of Internal Controls	Assessing internal systems to prevent errors and frauds.
Compliance Review	Ensuring adherence to accounting standards and legal provisions.
Substantive Testing	Performing analytical and detailed checks to confirm transaction validity.
Reporting	Forming an independent opinion and issuing an audit report.

Duties of an Auditor

An auditor’s duties are clearly defined under the Companies Act, 2013, and various auditing standards issued by the Institute of Chartered Accountants of India (ICAI). These duties ensure that the auditor conducts the audit with due care, skill, and professional integrity.

Before listing specific duties, it’s essential to recognize that the auditor’s responsibilities extend beyond mere verification—they include professional judgment, ethical conduct, and communication with stakeholders.

Major Duties of an Auditor

To examine books of accounts and financial statements.
To obtain sufficient and appropriate audit evidence.
To ensure compliance with accounting standards and legal requirements.
To evaluate internal controls and report deficiencies.
To report frauds or irregularities to the appropriate authority.
To issue a clear, qualified, or adverse opinion based on audit findings.
To maintain audit documentation as proof of work performed.

Powers of an Auditor

To perform the audit effectively and independently, auditors are vested with several legal powers under Section 143 of the Companies Act, 2013. These powers enable them to access necessary information and records without obstruction. The following are the key powers granted to auditors:

Power to access all books of accounts, vouchers, and documents at any time.
Power to obtain information and explanations from company officers.
Power to visit branch offices and examine branch accounts.
Power to receive notices and attend general meetings.
Power to inquire into specific matters, such as loans, advances, and investments.

Responsibilities of an Auditor

Auditors bear both professional and legal responsibilities for the conduct of their audits. These responsibilities ensure ethical behavior, objectivity, and due diligence throughout the audit process.

Before diving into the specific responsibilities, it’s important to note that an auditor acts as a watchdog, not a bloodhound — meaning they must remain alert but not suspicious without reason.

Type	Responsibility
Professional Responsibility	To maintain independence, objectivity, and confidentiality.
Legal Responsibility	To comply with the Companies Act and report frauds, if detected.
Moral Responsibility	To act in good faith and ensure public trust.
Reporting Responsibility	To express an honest and unbiased opinion in the audit report.
Documentation Responsibility	To maintain proper working papers as audit evidence.

Audit Process Followed by the Auditor

The auditor follows a systematic and standardized process to ensure the audit is conducted efficiently and accurately.

Before listing the steps, it is important to note that each phase of the audit builds upon the previous one, ensuring comprehensive coverage of all financial areas.

Stages of an Auditor’s Audit

Planning the Audit: Understanding the client’s business, assessing risks, and designing the audit strategy.
Internal Control Evaluation: Examining the control systems to determine audit procedures.
Audit Testing: Conducting substantive and analytical procedures to verify transactions.
Verification and Vouching: Checking vouchers, invoices, and supporting records.
Preparation of Working Papers: Documenting findings and audit evidence.
Formation of Opinion: Evaluating whether the financial statements are true and fair.
Audit Reporting: Preparing and submitting the final audit report to stakeholders.

Auditor’s Report

The Auditor’s Report is the final outcome of the audit process. It communicates the auditor’s findings, observations, and opinion on the financial statements. Before presenting the report, the auditor must ensure that all relevant audit evidence has been gathered and evaluated.

Type of Opinion	Meaning
Unqualified (Clean) Opinion	Financial statements are true and fair in all material respects.
Qualified Opinion	Except for certain issues, the financial statements are true and fair.
Adverse Opinion	Financial statements do not present a true and fair view.
Disclaimer of Opinion	Auditor unable to form an opinion due to insufficient information.

Importance of Auditor’s Audit

The auditor’s audit is vital for maintaining trust in financial reporting and ensuring corporate accountability. It benefits shareholders, management, regulators, and the general public by assuring the accuracy of financial information.

Ensures the reliability and credibility of financial statements.
Enhances transparency and corporate governance.
Detects and prevents errors, frauds, and irregularities.
Strengthens internal control systems.
Builds investor confidence and supports sound decision-making.

FAQs

Q1. What is an auditor’s audit?

An auditor’s audit is the independent examination of an organization’s financial statements and records to express an opinion on their accuracy and fairness.

Q2. What are the main objectives of an auditor’s audit?

The objectives include verifying accuracy, ensuring compliance, detecting frauds, and expressing an independent opinion.

Q3. What are the auditor’s main powers under the Companies Act?

An auditor can access all records, obtain explanations, visit branches, and attend general meetings.

Q4. What types of opinions can an auditor express?

The auditor can issue unqualified, qualified, adverse, or disclaimer opinions based on the findings.

Q5. Why is an auditor’s audit important?

It ensures transparency, builds stakeholder trust, and promotes accountability and good governance.

Tripti Mishra

Hi, I’m Tripti, a senior content writer at Oliveboard, where I manage blog content along with community engagement across platforms like Telegram and WhatsApp. With 3+ years of experience in content and SEO optimization related to banking exams, I have led content for popular exams like SSC, banking, railways, and state exams.