Audit of Accounts of Sole
Proprietor
Sole Proprietor or trader is a person who solely
owns, manages and controls a business.
Sole proprietor decides upon auditing the accounts
and decides upon the scope of audit and appointment of auditor. There is no
legal compulsion for audit of accounts of a sole proprietor but usually
business concerns get audited especially when the volume of transaction is
large. Before conduct of audit, the auditor should obtain an agreement from the
proprietor stating the scope, conduct and any specific instructions of audit.
The rights and duties of an auditor will depend upon the terms of agreement
with the client. In future when the auditor is charged for negligence, he can
protect himself by producing the agreement of audit.
The sole proprietor gets several benefits from
audited accounts; some of them are as follows:
1.
Accuracy
of Accounts: Audited accounts reveal the truthness and
correctness of transactions and provide an assurance that accounts are properly
maintained.
2.
Detection
and Prevention of Errors and Frauds: It helps in detecting and preventing errors and frauds in the
books of accounts.
3.
Provides
Assurance of Proper Accounting: The trader is assured that his incomes are properly accounted and
expenditures are properly vouched.
4.
Discovery
of Defalcations: He is also
assured of not being defrauded by any of his employees or agents, as the
defalcations are discovered by the auditor.
5.
Helps in
Comparing Accounts: The presentation
of accounts on a uniform basis helps comparison of various classes of
expenditure from year to year. In case the expenditure crosses the budgeted
targets, causes for the same may be ascertained and remedial measures may be
taken.
6.
Relied by
Statutory Authorities: The audited accounts are the reliable document of
sole proprietor for income tax and wealth tax purposes.
7.
Helps in
Settlement of Claims: Audited accounts
may also facilitate the settlement of various kinds of claims.
8.
Moral
Check on Employees: It enables to
have a moral check among employees especially among dishonest staffs.
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