Balance Sheet Audit

Balance Sheet Audit

The term “Balance sheet Audit” is an American contribution. It is more popular in U.S.A. It is very rarely used in India and other countries. In balance sheet audit, the auditor verifies the balance sheet items such as capital, liabilities, reserves and provisions, assets and other items given in the balance sheet. The auditor checks only those documents, which are related to the items given in the balance sheet and does not review other items which are not connected with the Balance Sheet.

Although, Balance Sheet Audit concentrates on the items of Balance Sheet, it does not exclude audit of other business operations. As the balance of Profit and Loss Account itself is part of the Balance Sheet, it will invariably include the examination of the items recorded in the Profit and Loss Account. It is similar to an annual audit. In India, no distinction is made between Balance Sheet Audit and Annual Audit.

In this audit, a backward process is followed to audit the balance sheet. First the item is located in Balance Sheet, and then it is located in the original records for the purpose of verification. This audit is based on the assumption that there exists a reliable system of internal control. It presumes that auditor is highly skilled and experienced.