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.