2.1 Objective and general principles of auditing

The objective of auditing is to provide an independent and objective assessment of financial information or other subject matters. The primary goal is to enhance the credibility and reliability of the information being audited and provide reasonable assurance to users of the information.

key objectives of auditing:

Expressing an Opinion: The main objective of auditing is to express an opinion on the fairness, accuracy, and reliability of the financial statements or other subject matters being audited. The auditor evaluates the evidence gathered during the audit to form an opinion on whether the information is presented fairly in accordance with the applicable financial reporting framework or other criteria.
Enhancing Financial Statement Reliability: Auditing aims to improve the reliability of financial statements by verifying the underlying transactions, balances, and disclosures. Auditors assess the adherence to accounting principles, evaluate the reasonableness of estimates and judgments, and verify the accuracy and completeness of the financial information.
Assessing Compliance: Auditors may also evaluate whether the audited entity has complied with relevant laws, regulations, and internal policies. This includes assessing compliance with accounting standards, legal requirements, industry regulations, and internal control procedures.
Detecting and Preventing Fraud: Auditors are responsible for identifying and addressing the risks of material misstatement due to fraud. They assess the risk of fraud in the financial statements, evaluate the internal control system’s effectiveness in preventing and detecting fraud, and perform procedures to detect potential fraudulent activities.
Evaluating Internal Controls: Auditors assess the effectiveness of the entity’s internal control system in ensuring the reliability of financial reporting. They identify and evaluate control weaknesses and make recommendations for improvements to enhance the internal control environment.
Providing Assurance to Stakeholders: Auditing provides assurance to stakeholders, such as shareholders, investors, creditors, and regulatory authorities, that the financial information they rely on is trustworthy and accurate. The auditor’s opinion adds credibility and increases confidence in the financial statements, helping stakeholders make informed decisions.
Maintaining Professional Skepticism: Auditing involves the application of professional skepticism, which means approaching the audit with a questioning mindset and critically evaluating the evidence and information obtained. This helps auditors to identify potential errors, misstatements, or irregularities and ensures a thorough and objective assessment of the audited information.

The general principles of auditing guide auditors in conducting their work and help ensure the integrity, objectivity, and professionalism of the auditing process. These principles serve as a foundation for auditors to follow and uphold throughout their engagements. Here are the key general principles of auditing:

Integrity: Auditors should maintain integrity and conduct themselves with honesty, fairness, and ethical behavior. They should act in a professional manner, avoid conflicts of interest, and uphold the public’s trust in the auditing profession.
Objectivity: Auditors must approach their work with objectivity and remain independent in both appearance and fact. They should exercise professional judgment and avoid being influenced by personal biases or undue influence from others.
Professional Competence and Due Care: Auditors should possess the necessary knowledge, skills, and expertise to perform their audit engagements effectively. They are expected to continually update their professional knowledge and skills to stay abreast of developments in auditing standards and techniques.
Confidentiality: Auditors have a duty to keep client information confidential. They should not disclose any confidential information obtained during the audit unless there is a legal or professional obligation to do so. Maintaining confidentiality helps build trust and encourages open communication between auditors and their clients.
Independence: Auditors must maintain independence in both appearance and fact. This means being free from any relationships or circumstances that may compromise their objectivity and professional judgment. Independence is crucial to ensure that auditors can provide unbiased and objective opinions on the audited financial statements.
Professional Skepticism: Auditors are required to approach the audit with a questioning mindset and exercise professional skepticism. This involves critically assessing the evidence obtained, considering the possibility of fraud or error, and challenging the assumptions underlying the financial statements.
Planning and Supervision: Auditors should adequately plan their audit engagements, including determining the audit scope, objectives, and audit procedures. Proper supervision should be in place to ensure that the work is performed by competent staff and in accordance with applicable auditing standards.
Evidence-Based Approach: Auditors rely on audit evidence to support their conclusions and opinions. They should gather sufficient, relevant, and reliable audit evidence through appropriate audit procedures to obtain reasonable assurance about the financial statements’ reliability and conformity with the applicable financial reporting framework.
Reporting: Auditors are responsible for issuing an audit report that communicates the results of their audit work. The report should be clear, concise, and provide a balanced and unbiased opinion on the financial statements’ fairness and compliance with the applicable financial reporting framework.