Chapter: 11th Auditing : Chapter 1 : Introduction to Audit
Limitations of Auditing
Limitations of Auditing
The limitations or disadvantages of auditing are as
follows:
1.
Gives
Opinion: After the completion of
audit, an auditor gives only the opinion regarding true and fair view of the
books of accounts and financial position of the business. Therefore, an auditor
is not an insurer; he does not give guarantee regarding financial reflections
of the business.
2.
Chances
of Undisclosed Errors and Frauds: An Auditor has to depend on many financial data and statements
supplied by the management which may be wrong or misleading. Therefore, there
may be some undisclosed errors and frauds in the books of accounts.
3.
Lack of
Proper Care and Skill: Often it
is seen that an Auditor does not apply proper care and skill to verify the
books of accounts and take it as a routine matter. As a result, the books of
accounts do not reflect true and fair view of the financial position of the
business.
4.
No
Evaluation of Managerial Efficiency: An Auditor is not an advisor, therefore, he cannot give his
opinion regarding managerial efficiency because every concern has its own
policy, procedures and practices.
5.
Not
Preventive: Audit is a post-mortem examination. The work of
audit starts after the completion of transactions recorded in the books of
accounts. Therefore, audited accounts can prevent the future activities but not
the past.
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