National Level Seminar on Recent Developments in Auditing 22 nd February 2013 Organized by Department of Commerce with Professional Accounting, SNR Sons College Technically Co-Sponsored by
National Level Seminar on Recent Developments in Auditing Copyright 2013 by Bonfring All rights reserved. Authorized reprint of the edition published by Bonfring. No part of this book may be reproduced in any form without the written permission of the publisher. Limits of Liability/Disclaimer of Warranty: The authors are solely responsible for the contents of the paper in this volume. The publishers or editors do not take any responsibility for the same in any manner. Errors, if any, are purely unintentional and readers are required to communicate such errors to the editors or publishers to avoid discrepancies in future. No warranty may be created or extended by sales or promotional materials. The advice and strategies contained herein may not be suitable for every situation. This work is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional services. If professional assistance is required, the services of a competent professional person should be sought. Further, reader should be aware that internet website listed in this work may have changed or disappeared between when this was written and when it is read. Bonfring also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic books. ISBN 978-93-82338-43-7 Bonfring 292/2, 5 th Street Extension, Gandhipuram, Coimbatore-641 012. Tamilnadu, India. E-mail: info@bonfring.org Website: www.bonfring.org
i Managing Trustee Message The small initiatives that we take go a long way in building upon the edifice of knowledge that empowers and emboldens the young aspirants. International Standards in Auditing gains greater attention, globally, in recent years. I congratulate the Commerce with Professional Accounting Department for conducting a National Seminar on the topical subject Recent Developments in Auditing and successfully publishing the conference proceedings. I would like to express my considerable appreciation to all the authors of the articles in this volume. Let me also take this opportunity to wish the Department of Commerce with Professional Accounting success in all their academic endeavors. With Regards Thiru.C. Soundara Raj Managing Trustee, SNR Charitable Trust
iii Principal and Secretary Message In an increasingly complex world, where the technology and management advances at a rapid rate, the field of Commerce also has extended its command over globalization and attained vibrant growth. Realizing the needs of the current society, when we have a proud distinction of offering many Commerce related courses, the Department of Commerce with Professional Accounting has proved its fortitude and preeminence by conducting a National Seminar on Recent Trends in Auditing and taking the articles into publication. I sincerely hope that each article of this volume will provide some significant stimulation to a reasonable segment of the community of readers from the field of Commerce. I wish the department to conduct many National / International seminars and publish many volumes of books on the contemporary issues of Commerce. With Regards Dr.H. Balakrishnan Principal & Secretary, SNR Sons College
v Editorial Board Message We thank the readers for the overwhelming response and the support given for the National level seminar on RECENT DEVELOPMENTS IN AUDITING which is conducted on 22nd February 2013 (Friday) and selected papers has been bought as a detailed collection of informative papers with ISBN on the same day. Auditing is a vital part of accounting. Traditionally, audits were mainly associated with gaining information about financial systems and the financial records of a company or a business. Financial audits are performed to ascertain the validity and reliability of information, as well as to provide an assessment of a system's internal control. The goal of an audit is to express an opinion of the person / organization / system (etc.) in question, under evaluation based on work done on a test basis. Due to constraints, an audit seeks to provide only reasonable assurance that the statements are free from material error. Hence, statistical sampling is often adopted in audits. In the case of financial audits, a set of financial statements are said to be true and fair when they are free of material misstatements a concept influenced by both quantitative (numerical) and qualitative factors. But recently, the argument that auditing should go beyond just True and fair is gaining momentum. An audit must adhere to generally accepted standards established by governing bodies. These standards assure third parties or external users that they can rely upon the auditor's opinion on the fairness of financial statements, or other subjects on which the auditor expresses an opinion. In the United States, audits of publicly traded companies are governed by rules laid down by the Public Company Accounting Oversight Board (PCAOB), which
was established by Section 404 of the Sarbanes-Oxley Act of 2002. Such an audit is called an integrated audit, where auditors, in addition to an opinion on the financial statements, must also express an opinion on the effectiveness of a company's internal control over financial reporting, in accordance with PCAOB Auditing Standard No. 5. There are also new Development in becoming available. Due to the increasing number of regulations and need for operational transparency, organizations are adopting risk-based audits that can cover multiple regulations and standards from a single audit event This is a very new but necessary approach in some sectors to ensure that all the necessary governance requirements can be met without duplicating effort from both audit and audit hosting resources. Keeping this in mind, today national level Seminar is hosted by the Department of Professional Accounting of SNR Sons College to bring about experts in the field of education, research and allied field for interaction and discussion. We thank the teaching fraternity of the Department of Professional Accounting who supported for this programme of knowledge sharing. Nothing could take place without an efficient team of workers and their tremendous efforts put forth by the members of the association of Professional Accounting who are young, energetic, and efficient and possess a multi faceted skill in organizing these type of events. It is no one other than students of Professional Accounting who contributed themselves for the success on this event. We look forward with pleasure, the views, comments, suggestions and criticism from the readers, which would definitely helps us in further improvement in conducting Seminar like this in future and for necessary changes in the forthcoming publications. Editors
vii About the College S.N.R. Sons College is one of among the reputed Institutions run by S.N.R Sons Charitable Trust, founded in the year 1970 to fulfil the dreams of Sri S.N.Rangasamy Naidu, a great philanthropist and a man of vision. This college was started in the year 1987. Since then the college has achieved farreaching excellence in the field of higher education. The college has highly motivated, experienced and dedicated teachers to attain the mission of the college. UGC recognized our college under the sections 2(f) and 12B of the UGC Act 1956. This enables us to get grants from UGC on various heads like major and minor research projects, Conferences, Symposia, COSSIP programme etc. About the Department This Department was established in the Academic year 2010 2011 with the aim of providing commerce education with Professional Accounting to the students. Accounting is the collection, measurement and communication of economic information which is used for planning, reporting and decision making. Accountants are employed in all areas of commerce, industry and overnment. Educational institutions are compelled to provide quality personnel to meet the human resource requirements. Keeping this in view the Department prepares students with sound commerce background along with the professional skills to carry out all the work in different areas of trading and manufacturing organizations. This accounting degree will prepare The students to practise as an accountant and do professional courses simalteneously during the the three year course. They will learn the essential accounting knowledge and a range of business related skills in information technology, statistics, economics, commercial law and financial management.
ix Faculty Profile Dr.K. Prince Paul Antony Dr.K. Prince Paul Antony presently working as assistant professor in department of commerce with professional accounting, S.N.R Sons College Coimbatore has got 12 years of teaching experience and 1 year of industrial experience in Susheela Balakrishnan Associate as Assistant Concurrent Auditor. He started his career in teaching since june 2001, at SNMV college of arts and science. He had his graduation from CBM college and pursued his research degree in marketing in SNR Sons College. He had also qualified Post Graduate Diploma in Computer Applications from Madurai Kamaraj University, Madurai. Having interest in management programme he has completed Post Graduate Diploma in Bussiness Administration from Pondichery University, Pondicherry and Master of Bussiness Administration from Bharathiar University. During his tenure in Bishop Ambrose College from 2002 to 2011 he served as Eco Club Cordinator, NSS programme officer and youth red cross co-ordinaror by keeping the cadets very active in various social welfare activities. He was awarded Doctorate in the year 2011. He had been recognized as research guide for M.Phil / Ph.D research programme under Bharathiar University, Madurai Kamaraj University and Alagappa University. He had produced 7 M.Phil under his guidance and on date, 3 candidates had registered for Ph.D under his guidance. He is having a credit of publishing 3 Q&A scanner books for the students of Bharathiar University with United publishers in papers related to Principal of Accountancy, Financial Accounting and Direct Taxation I.
Faculty Profile Ms.P.K. Bindhu Ms.Bindhu.P.K, Faculty, Department of Professional Accounting, S.N.R Sons College have finished her all degrees in the college affiliated to Bharathiar University.She cleared her National Eligibility Test for Lecturers in the year 2007.She is currently pursuing her PhD in commerce, specializing in Finance. She started her career in teaching in the year June 2007.Prior to her appointment as a faculty in SNR Sons College, she served as a lecturer in Bishop Ambrose College for a period of four years.during that span of time she served as a member of the College Magazine Committee and also acted as the fine arts coordinator of the college for the period of four years. She is the staff coordinator of B.Com (PA) Department in SNR Sons College for the current year 2012-2013. On the Academic side she has attended and presented papers in National, State level and Regional level seminars. She has published two books in College Q & A scanner for Bharathiar university students of B.Com. She has served as the member of the Organising Commitee of the State level Seminar conducted Last year.
xi Faculty Profile Mr.V. Padmanabhan Mr. V. Padmanabhan M.Com, M.Phil, MBA, PGDCA, NET is working as an assistant professor of commerce with Professional Accounting in SNR Sons College, Coimbatore He has 8 Years of teaching experience which includes 7 years for PG. His area of specialization is Finance. He has been handling MBA distance classes for Bharathiar university and Annamalai university for past 7 years. He has organized inter collegiate competition held at SNR Sons College. He is pursuing his Ph.d. He has successfully completed his National Eligibility Test (NET) during June 2011. He has guided 5 M.Phil students. He has presented 14 papers in National level seminar and 1 paper in International Seminar He has also made publications in 2 ISBN journals.
Faculty Profile Mrs.R. Geetha Mrs. R. Geetha M.com, Mphil, MBA, PGDCA, NET is working as an Assistant Professor of Commerce with Professional Accounting in SNR Sons College, Coimbatore. Previously she was working as Assistant Professor in CMS College of Science and Commerce, Coimbatore. She has been Fine Arts co-ordinator and organized many cultural events. She has organized inter collegiate competition held at SNR Sons College Mrs. R. Geetha is having 6 years of Industrial Experience and 6 years of teaching experience. Her area of specialization is Marketing. She has handled Part time MBA classes for IFAI students. She is being handling MBA Distance classes conducted by Bharathiar University for past 5 years. She is pursuing her Ph.d. She has successfully completed the National Eligibility Test (NET) conducted by UGC during December 2010. She has presented 9 papers in national conference and 2 papers in International conference. She has published 5 articles in the ISBN journals and 1 article in ISSN international journal.
xiii National Level Seminar on Recent Developments in Auditing Committee Chief Patron Patron Convener Co- convener Executive Committee Members Thiru.C.Soundara Raj Managing Trustee, SNR Charitable Trust Dr.H.Balakrishnan Principal & Secretary SNR Sons College Dr.K.Prince Paul Antony Asst. Professor in Commerce (PA) SNR Sons College Ms.Bindhu.P.K Mr.V.Padmanabhan Mrs.R.Geetha Ms..S.Sarathampal Ms.S.Sridevi Mr.R.Sangameshwaran Ms.M.Arunthadhi Ms.S.Shahnaz Mr.R.Amjith Mr.R.Ram Kumar Mr. Dinesh Pandian. Ms.V.Charumathi Mr.S.Surendran Mr.M.Prasanth Mr.J.Edwin Prince Mr.M.Ravi Kumar Mr.ASrihariram Ms.R.Jeevitha Co-Committee Members B.Com (PA) Students
Contents Paper ID Title/Author Page No. RDA001 RDA002 RDA003 RDA004 RDA005 RDA006 RDA007 RDA008 RDA009 RDA0010 RDA011 RDA012 RDA013 RDA014 Applicability of Accounting Standards An Overview Dr.M. Nandhini and M. Usha Applicability Of Accounting Standards V. Krishnaveni and Dr.R. Haridas Recent Developments In Auditing Dr.M. Nandhini and G. Suganya Devi Evolving Role Of The Auditor And Importance Of The Auditing For Business, Owners And Governments J. Kalaisigamani Tax Audit V. Sasikala and M. Aravindakshan Recent Developments in EDP Audit S. Afsal Ahmed and D. Saranya The Role of the Management Accounting in Financial Auditing Quality Enhancement Dr.Rachel Nancy Philip and J. Gayathri Role of Auditing Standards in India Dr. G. Sathiyamoorthy Audit Techniques in EDP Environment P. Kalaiselvi An Overview of Tax Audit Dr.P. Velusamy Role of International Auditing and Assurance Standard S. Kanchana and J. Sheeba Applicabilaty of Accounting Standards K. Vismitha and Monambigai Marketing Audit Sharin Williams and S. Santhiya Ethics Audit P. Preetha 1 4 9 14 17 19 21 25 28 31 34 38 41 44
RDA015 RDA016 RDA017 RDA018 RDA019 RDA020 Role of Internal Audit in Banking Sector C.N. Rubha Auditing Standards in India R. Francina Pracila Mary and R. Kiruba Electronic Data Processing based Auditing- An Overview V. Annapoorani Ethics in Auditing S. Maheshwari, V. Arulmathi and M. Nithya Emerging Trends in Internal Auditing Dr.K. Jothi A Study on Financial Statement Presentation under Revised Schedule VI P. Arun Prakash and T. Ganesh Kumar 48 51 54 58 62 64 RDA021 Role of Auditing and Assurance Standards Board An Overview P. Arun Prakash and N. Suresh Chander 67 RDA022 RDA023 RDA024 RDA025 RDA026 RDA027 RDA028 Audit of Public Sector Undertaking Bharka Gupta Accounting Standards in India K. Myilswamy Applicability of Accounting Standards K.R. Malar Chitra and A. Banu Priya Tax Audit N. Jisha and Basil Varghese Audit of Public Sector Undertaking S. Gomatheeswari and K. Manoranjitham Applicability of Accounting Standards (AS) K. Aruljothi and V. Sridevi Tax Audit B. Geethpriya and L. Divya 71 72 76 80 83 87 92 RDA029 RDA030 Audit Ethics Dr.S. Sumadevi and C. Aishwarya Audit Ethics S. Vijayalakshmi and G.A. Hema 94 97
RDA031 RDA032 RDA033 RDA034 RDA035 RDA036 RDA037 RDA038 RDA039 RDA040 RDA041 RDA042 RDA043 RDA044 RDA045 RDA046 RDA047 Audit Of Public Sector Undertakings In India S. Sujatha and S. Thilagavathy Survive the Tax Audits Siji Jose Role of International Auditing and Assurance D. Dhivya Audit Ethics K. Sudhadevi Common Audit Problems and How to Deal with Them S. Poornima and K. Manoj Kumar EDP Based Audit A.Sulekha and R. Deepan Kumar Audit Ethics S.B. Sanjay Ram, S. Venkatasubramaniam and B. Arthi Tax Audit T. Rajavelu Recent Aspect in E-HRM Dr.S.M. Yamuna and S. Santhoshini The Role Of Internal Auditing and Internal Auditors N. Saranya, P. Anitha and M. Yamuna International Auditing And Assurance Standards Board R. Akshit Mehta and Shaikh Kasam Mohammed Introduction To Modern Auditing H. Rakesh Kumar and S. Selva Krishna Internal Auditing M. Parameshwari, D. Sreemathi and N. Nathiya Recent Developments In EDP Based Audit Matilda Danny and S. Thelma Ruth Preethi Role Of International Auditing And Assurance Standards V. Sumathi and Dr. P. Palanivelu Information Technology (IT) Auditing Impact and Challenges: Indian Scenario Dr.R. Vijayakumar and C.Manivel Liabilities Of An Auditor S. Vennila Fathima Rani and D. Sharon 100 103 106 109 112 115 117 121 123 125 129 131 133 137 140 143 146
RDA048 RDA049 RDA050 RDA051 RDA052 RDA053 RDA054 RDA055 RDA056 RDA057 RDA058 RDA059 RDA060 Tax Audit K. Rajarajeswari, N. Saranya and P. Vanitha Different Types Of Auditing And Its Process K. Mohanraj Practical Approach To Audit D. Divya, R. Sivasankari and P. Janani Issues And Importance Of Accounting D. Sathiya Priya Recent Trends in Internal Auditing M. Poornima and Arunthathi Audit Evidence M. Bhuvaneswari Auditor Independence J. Sophia and Sridevi Fundamental and Principles of Auditing S. Rani Lakshmi Recent Development In Auditing Shajitha Banu and Sivaprakash Public Sector Audit Dr.K. Umadevi and M. Prakash Standards on Auditing and the Quality Review Board V. Sini International Auditing and Assurance Standards Board I. Parvin Banu and Sarathampal Information Technology in Auditing D. Santhanakrishnan and A. Sangameshwaran 148 150 153 154 159 162 165 169 171 174 178 182 184