Meaning of Audit Note Book
Audit Note Book is a sort of diary. Just as most of the people maintain diary to record therein their observations of daily life as well as of special occurrences relating to their life, similarly an audit note book is maintained by an auditor or his audit clerk to record therein his observations during the course of his audit work, special and important points which he wants to discuss with his seniors or boss. Quarries made by him and the replies thereto during the course of audit work are also recorded in this note book. This note book may take the form of a bound book or even loose leaf sheets filed together.
All such points which occur during the course of audit, i.e., important quarries, their replies, information sought but not replied or given in time, or unsatisfactory replies received etc., must be recorded here.
Important Facts or Content of Audit Note Book
The following informations must be recorded in an Audit Note Book :
- Name of the Business.
- Organisational structure of the enterprise.
- Provisions of Memorandum of Association and Articles of Association having a bearing on the audit work. Instructions received from the management having relevant bearing on the audit work.
- List of Books of account maintained by the enterprise.
- Accounting methods followed by the enterprise and shortcomings, if any.
- Irregularities, if any, found during the course of audit relating to non-observance of the provisions of the concerned laws, rules or notifications.
- Names of key officials and their rights, duties and responsibilities.
- Details of the internal control system in vogue in the enterprise.
- List of missing vouchers and receipts.
- Quarries requiring explanation or clarification.
- Audit Programme of the concerned audit.
- All such informations and points which are to be used in the subsequent and future audit work.
- Detailed account of all such securities which have been verified, and examined.
- Progress of the audit work.
- Totals and/or balances of important accounts of the ledger book.
- Bank Reconciliation Statement.
- Books and records not made available for audit.
- Details of officers who have given certificate for bad debts, depreciation etc.
- Points to be included in the Audit Report.
- Dates of commencement and completion of audit work.
- Any other information which the auditor thinks proper to mention in the audit note book.
It should be noted that trivial matters or matters which can be settled on the spot with the authorities need not be written in the audit note book. Only important matters should be recorded in this note book.
Merits of Audit Note Book
The following are the merits of Audit Note Book:
Proof in the Court of Law:
In case the auditor faces charges of negligence in the court of law, the auditor can produce this audit note book as an evidence. This audit note book testifies the intelligence, ability and loyalty towards the profession of auditor.
Estimation of the Progress of Audit Work:
The audit note book gives an idea of the progress of the audit work. The auditor can adjust/modify the audit programme if need arises with the help of this book.
Helpful in Future Planning of Audit Work:
If the auditor has to commence the audit work of the same company in future, he can commence the work on the basis of this audit note book, since the irregularities and discrepancies found in the earlier audit shall guide him in planning his audit work now.
Helpful in Carrying Audit Programme:
This book proves of utmost help in preparing and carrying out the audit programme, since most of the important and main informations are recorded in this note book.
The two important cases filed against the auditors for negligence and dereliction of the duties are London and General Bank and City Equitable Fire Insurance Company. In both the cases the verdict of the Court went in the favour of auditors and the main reason was the Auditor's Audit Note Book.
Demerits of Audit Note Book
In reality, there is no demerit of audit note book. This audit note book is so useful that auditor must maintain it. For him, it is a very important note book. On the other hand, this book proves fatal for a negligent auditor, as this note book depicts a true picture about his way of working in the course of the audit in question. On this basis he can be charged for negligence. Even an honest, conscientious and loyal auditor can be held liable for negligence, if he does not maintain a correct record of his audit work in this note book. No body can save him from this charge.
FAQ
Ans: Audit note book is maintained by an auditor or his audit clerk to record therein his observations during the course of his audit work, special and important points which he wants to discuss with his seniors or boss.
