Postulates in Auditing

[hrinkaa]

hi from hrinkaa. I have 2 questions

Anybody can give a summary of the Auditing postulates, how they apply and what are the criticisms levelled against them. Explaining How can the postulates apply with real life examples will be really appreciated.

"An Auditor is a watchdog not a bloodhound" - is a famous saying. In light of major audit delinquencies, is this saying still applicable.

Being a bloodhound is now not expectation but a need in reality. Do our folks agree?

[Vandana]

Hi Hrinkaa,

Apologies for the delayed reply. Mautz and Sharaf (1961) were the proponents of the postulates of auditing. Basically this is the audit equivalent of the 'framework for preparation and presentation of financial statements' which the IASB has come out with.

A postulate is defined as 'a concept that can be observed to be relevant
to some course of study.' So the principles or postulates, are the basis of auditing theory.

Certain postulates that underlie the practice of auditing were identified:

Truth and fairness – the auditor is concerned that the financial statements under conform to best practice.

Independence – the auditor is free from the control and influence of others when preparing the financial statements

Evidence – an auditor arrives at his opinion through collection of evidential data and bases his judgement on this.

Responsibility – the auditor does not prepare financial statements or guarantee their accuracy nor is he a business valuer. He is not responsible for the prevention or detection of immaterial fraud.

All of this has been absorbed into the IFAC and ACCA codes of conduct.

Hope this helps!:)