Para 7.1.2 — MSO (Audit)
Original Rule Text
7.1.2 Treatment of the results of audit demands the highest qualities of understanding, balanced judgement and a sense of proportion. It is to enable the auditor to adequately deal with the results of his audit that he has been accorded a high degree of independence and prestige. An auditor must develop an instinct for assessing the importance of an individual irregularity as well as adequacy of the system. The auditor must remember that his primary functions are to secure the substantial correctness of accounts, the regularity and propriety of individual financial transactions, and examine the adequacy of systems and procedures. On completion of the detailed audit of accounts and transactions and on noticing infractions of rules and orders, he must therefore decide whether to insist on the regularisation of or rectification of irregularities or errors in individual cases and improvements in systems or whether to be satisfied with their prevention or recurrence in future.
What This Means
Handling audit results requires balanced judgement and a sense of proportion. An auditor must assess whether each irregularity needs immediate correction or whether ensuring it does not recur in the future is sufficient. The core job is to ensure accounts are substantially correct, financial transactions are regular and proper, and systems and procedures are adequate.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Key Points
- 1Audit treatment demands understanding, balanced judgement, and a sense of proportion
- 2Auditors enjoy independence and prestige specifically to handle results wisely
- 3Primary functions: correctness of accounts, regularity of transactions, and adequacy of systems
- 4For each irregularity, the auditor must decide between insisting on rectification vs. preventing future recurrence
Practical Example
An auditor finds that a government office has been booking telephone bills under a slightly wrong budget head for the past quarter. While technically an irregularity, the amounts are correct and no money was lost. The auditor uses balanced judgement and issues guidance for correct classification going forward rather than demanding retrospective correction of each individual entry.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Frequently Asked Questions
Why is balanced judgement emphasized so strongly for auditors?▼
What are the three primary functions of an auditor as stated here?▼
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.