1. Chapter 2

2. Advantages of an Audit For Limited Liability Companies –Satisfies a regulatory requirement –Help to discharge the stewardship function –Shareholders get credibility For Partnerships –When new partners join or old partners retire, to determine his/ her share (to be brought in or payable) more reliably –Remove disputes in profit sharing –To determine GW reliably in case of change of PS

3. Advantages of an Audit For any entity –Provides a high level of assurance for users –Facilitates external and internal financing –In case of merger or acquisition provides a reasonable basis for valuation –As a by-product internal control weaknesses are (with recommendations) reported –For a small entity other services can also be obtained –Expert advice is provided

4. Purpose of Auditing Provision of an opinion to FS users or detection of fraud and error ? Detailed checking or other audit approach ? What are such ‘other’ approaches?

5. Agency Theory & Auditing The directors are the agents of the shareholders There may be conflicting interests among such parties Auditing can strengthen the agency relationship and weaken any conflicts

6. Positive & Negative Expression of Opinion Based on level of assurance provided E.g s. ?

7. Internal Vs External Audit Objective (Internal controls Vs Opinion) Legal basis (Not a requirement Vs Requirement) Scope ( Operational + Financial Vs Financial) Approach (System based Vs Risk based) Responsibility ( Mgt Vs External users)

8. Scope of Auditing Defined in SLAuS 1 The ability ?

9. The Social Concept of Auditing Financial Audit Perspective: Adds value to the society by adding to the efficiency of the market + investment funds to rationally be allocated Holistic View: Examines the discharge of the duty has been properly done by the (social) entity – A Social Audit Report ?, Corporate social responsibility, environmental reporting and social auditing are emerging concepts under this view