The auditor must gather sufficient competent evidential matter as a basis for forming his opinion on :
(a)
the truth and fairness of the accounts and also their compliance with
the provisions of the related laws, rules and regulations;
(b) the proper keeping of the accounting records, and other records and related registers of the client.
These broad objectives may be amplified as follows :
To determine whether :
(1) all assets and liabilities are properly stated and classified on a basis consistent with that of the previous year;
(2) proper disclosure is made of securities for liabilities and of assets charged or secured;
(3)
the client has complied with the provisions of the applicable laws and
documents created under them, loan agreements and other documents to
which he is a party;
(4)
income and expenses are properly classified and disclosed and are
properly matched. They relate to the period in which they are reported
and have been determined on a basis consistent with that of the previous
year;
(5) all contingencies and commitments are properly disclosed;
(6) no material omissions have been made in the financial statements;
(7)
no material error or inaccuracy in reporting or disclosing income,
expenses, assets and liabilities has been created in the financial
statements;
(8) the books and records have been properly kept in accordance with the requirements of the client.
The
expression of opinion on the overall balance sheet and profit and loss
account involves initially forming an opinion on each of the balance
sheet or profit and loss items; it is necessary first to decide what are
the essential conditions or prerequisites for each balance sheet or
profit and loss account item in order to give a true and fair view of
the particular assets or liabilities or item of income or expense being
represented. These conditions are well established and may be illustrated by reference to the areas of sundry debtors and sales revenues.