Limitations of Auditing
Truly speaking an audit should have no limitation of its own. It is designed to protect the interest of all parties who are interested in the affairs of the business. If these is any short coming arising there from, it may be due to its narrow scope of application in its related field of operations and un-extended designition of the concept. The audit has following limitations.
1. Lack of complete picture—The audit may not give complete picture. If the accounts are prepared with the intention to defraud others, auditor may not be able to detect them.
2. Problem of Dependence—Sometimes the auditor has to depend on explanations, clarification and information from staff and the client. He may or may not get correct or complete information.
3. Existence of error in the audited accounts—Due to time and cost constraints, the auditor cannot examine all the transactions. He uses sampling to check the transactions. As a result,there may be errors & frauds in the audited accounts even after the checking by the auditor.
4. Exercise of judgement—The nature, timing and extent of audit procedures to be performed is a matter of professional judgement of the auditor. The same audit work can be done by two different auditors with difference in sincerity & personal judgement.
5. Diversified situations—Auditing is considered to be a mechanical work. Auditors may not be in a position to frame audit programme which can be followed in all situations.
6. Lack of Expertise—In some situations, an auditor has to take opinion of experts on certain matters on which he may not have expert’s knowledge. The auditor has to depend upon such reports which may not be always correct.
7. Limitations of internal control—The auditor can only report on the truth and fairness of the financial statements. But other problems relating the management and control may not be possible to be covered by the auditor. Examples of such problems or limitations of internal control are cast-ineffectiveness, manipulations by management, etc.
8. Influence of management on the auditor—This is also come of the limitations of the audit that the auditor is influenced by the doings of those in management. The reason is that he is appointed by the share holders and directors who pay him remuneration or fee.
