Financial Audit should be conducted by a Chartered Accountant within the meaning of Chartered Accountants Act, 1949. He should complete the audit within a llimited time. So he resorts to persuasive evidence rather that conclusive evidence. Financial Statements audited by a CA does not assure the future viabilitry of the business
Dear Sachin, Inherent Limitations mean that limitations are always included in Audit itself. Auditor is unable to do detailed checking of books of accounts due to time factor. Auditor is unable to collect conclusive evidences due to sampling.
Dear Freind, We know that Financial Audit starts from where Financial Accounting ends. Financial Audit should be conducted by a Chartered Accountant within the meaning of Chartered Accountants Act, 1949. He should complete the audit within a llimited time. So he resorts to persuasive evidence rather that conclusive evidence. Financial Statements audited by a CA does not assure the future viabilitry of the business. All the Best
The Statutory Auditor is supposed to express his opinion on the financial statements which is subject to audit. He perceives various audit techniques to obtain reasonable assurance that the fiancial statements are free from material misstatements and they represent true and faire view. Resonable assurance is the high level of assurance. Even though the Auditor applies various audit techniques there are **inherent limitations of audit** where by the auditor may land in wrong judgement. The Follwoing are the **inherent limitaions of audit** 1. In Audit, Sampling technique will be used which means 100% (hundred percent) verification of transactions in not possible. 2. Audit is judgemental Where by the auditor may land in givng wrong opinion. 3. Presence of Fraud. Fraud is always supported by an activity which conceals its presence, where by it bceomes dificult to detect known misstatements-fraud. 4. Audit evidences are persuasive in nature rather than conclusive. Thus, the inherent limitations of auditing cannot be prevented but the auditor with his audit techniques, professional judgement and expreience can reduce the limitations to appropriate level.
In simple words since the opinion expressed by the auditor is neither an assurance for the future viability nor the effectiveness and efficiency by which the management has conducted affairs of the enterprise and since the auditor cannot reduce audit risk to zero therefore he cannot obtain absolute assurance that the financial statement are free from material misstatement due to fraud and error and this is called the inherent limitations of the audit. and examples of inherent limitations are:- 1)test checking 2)timeliness of financialreporting and balance between benefit and cost
Inherent limitations are not having any assurance for users. financial statements are absolutely free of (material) misstatements. limitations auditor provide reasonable assurance which is high level of assurance i.e. reasonably high but not absoluteness. Inherent limitations is not eliminated completely but the effects are reduced to an appropriate level. On auditor’s point effect is reduced by taking these steps e.g. proper planning to conduct audit engagement especially the risk prone areas, adequate supervision of junior members of audit team etc