AUDIT IS WHOLESOME SERIOUS ACTIVITY WHICH I LIKE VERY MUCH THEN WHY I DISCONTINUED LONG AGO? A mind opener for all concerned

[CA DEV KUMAR KOTHARI]

Auditing is a wholesome activity:

Auditing is a wholesome activity in which one have to have reasonable knowledge  in various related fields, including knowledge about business of auditee/ client, and expert  knowledge in some of subjects directly related to  accounts, internal check and control, verifications and  auditing and reporting.

As an auditor or even as an assistant to auditor you have lot of scope to learn many new things in each assignment. As you are on receiving end, you get feedback from auditee and it is easy to learn. As an auditor you can call for records relating to any matter including legal matters and learn a lot.

Auditing is assignment which provide lot of interaction with many people having different capabilities and expertise, many type of businesses, ground realities of business etc.

Audit assignments also provide opportunities to travel and visit many places. Travelling itself is a big source of learning.

Preliminary discussions- on education, training etc:

Education and good quality of teachers:

I always consider that education in nursery and primary classes is foundation for life. What you learn and develop as mind-set, habits,  and human values during studies up to fifth class is very important in entire life. Therefore there must be more emphasis for providing best quality of teachers.

After primary classes each class is important for any of given subject.

Good quality of teachers is important at all levels of education and training. I was lucky that many of my teachers were very good. They were performing duties as GURUS in real sense. I would like to mention great Jethmal Ji Kiradoo, Great Prahald Rai Kiradoo and Great Hanuman Prasad Ji Sharma from whom I had learned book-keeping, accounting and commerce during class IX to XI. . I had also very good teacher Great Shri Paliwal ji whom was teacher of science and mathematics in class IX and X.

 Those teachings are foundation in my career as A CA, CMA and CS.  At that time also salaries of teachers was very low, however, these gurus were very honest and happy to teach students without any extra consideration. Unfortunately author had also experience of many teachers who were greedy and used to be partial and favouring students who had availed private tuitions and thereby causing harm to many students including author.

Teacher’s quality:

It is high time to consider that quality of teachers need to be improved at all level. Teaching should be more remunerative and glorifying than what is at present. Due to lengthy gestation period, low salary and corruption in appointment of teachers, many people prefer to join other services or profession instead of teaching.

In many institutions we find teaching being considered a sort of formality to a great extent. This is because teachers are easy going and are unable to kindle interest in lectures. Students are also more interested in scoring better and not necessarily learning better.

Remuneration of teachers at all level are much low and deserves to be hiked significantly. Teaching must be made corruption free for better future of society at large.

 Before auditing sound knowledge of book-keeping and commercial studies is important:

Before auditing, the audit assistant must have good knowledge of basics of book-keeping, accounting and commercial knowledge.  This will help in doing auditing at preliminary level in better way. Auditor and audit assistant must have zeal to learn always.

I liked auditing work – a recall of my experience:

(a) During my training period I had privilege of getting able guidance of my GURUS. First I had a training opportunity under great CA B.M.Daga ji and CA Shri Deshpandey ji of Daga & Co, Chartered Accountants Bikaner. This was for about six months during course of B.Com final year and its examination as I wanted to have training. During this period I had opportunity to work in team work with other Audit staff of Daga & Co. all of whom were senior to me by age as well as by qualification and experience. Being junior most, naturally I had opportunities to learn from every senior. Notably among them I recall guidance of Shri Parasmal Daga , Shri B.D. Vyas, Shri Rajeeva Aeron, Shri A. Gulgalia, Shri Bal Kishan Modi. I worked hard and learned a lot. My seniors allowed me to do something new in course of audit which earlier they had not done. This was fruitful and therefore, in other audit assignments emphasis was increased on physical verifications, cross verifications, documentary verification etc. As a result, I also had opportunity of direct interaction with partners.

(b) Thereafter, I had opportunity, as an articled clerk, under honourable Sir CA Shri Mahabir Prasad Kedia ji, at Kolkata, to learn a lot from his vast knowledge, able guidance and various specialized abilities he has in professional fields and behavioural matters. Here again as a new entrant, I was junior most, hence I had more opportunities to learn and sharpen skills while working with team mates including Shri Bharat Gupta, Shri B.B.Singh, Shri Malhotra, Shri . My experience at Daga & Co proved very useful and within few months I was considered as senior audit assistant.

(c) To have diversified knowledge about industries, I had to take transfer and I joined M/S M/C.Bhandari & Co. There also I had privilege of learning from honourable Sir, CA Shri Megh Raj Jain (Pugalia Ji) and other team mates in many assignments.

I was a team member in various assignments and I learnt from seniors and juniors both. I also learnt a lot from people of clients/ auditees of my principals. In some assignments I had privileges of working with other auditors of client who were carrying other audit at the same time. From all one can learn if one has open mind.  This is because you can learn from anyone, because everyone has some specialities in behaviour, knowledge, and manner of dealing with people and situations. Some of team mates were very serious, some serious, some were of jolly nature and off course many were lazy, slow going , who preferred and  wanted to just pass time  and to enjoy entertainment and other activities during audit assignments.

 Hence I was in a group and team of people of various types and this also added in learning and enjoyment of work.

Team Work:

I had good experience of working in team in various audit assignments under three very able and serious Chartered Accountants.

Audit is a serious and important assignment:

I always considered auditing of any organisation a serious and important assignment with lot of responsibilities of auditor- even as a junior audit assistant.

This is irrespective of   size and nature of organization and amount of audit fees. Once you accept an audit assignment, it must be performed with utmost care, due diligence, and honesty. This is because all direct and indirect stake holders and people who deal with your client, rely on audited accounts.

Accounting itself is a serious and important work, it cannot be taken lightly, so is auditing because it involves checking of accounts which need to be prepared carefully and seriously.

In case auditor find that the accounts have not been prepared with due care and the organization is not having reasonable check, control and balances, it would be better for him to first ask the accounts department and management to review and prepare accounts in a suitable manner. If they are not willing to do so, it is better to resign from office of auditor (This is personal view of author)

Physical verifications and documentary verifications are very important:

I always considered physical and documentary verifications very important. I used to take physical verification of workers also. Though physical verification was not liked by many of my team members and the auditee /client but still I used to do, because I considered physical presence of auditor at work places, head count of people working , at rest place and information about  absent workers and staff,   physical observation on working conditions, physical verifications of inventories – finished goods, work-in-progress,  raw material, stores  and spares, fixed assets,  as important aspects of auditing and to have an insight, which is necessary to impart role of auditor in a better manner.

Auditor must have freedom:

Auditor must have freedom (without much constraints) to perform auditing function in a reasonable manner and to his satisfaction. It is true that auditing is to be completed in a time bound manner, however, still within time boundaries, auditor must have reasonable freedom to perform audit by early planning, continuous audit,  deploying more people , getting more assistance and co-operation from client etc. During my training period, I enjoyed auditing as I was given freedom in expanding scope of checking, doing physical verifications, asking for cross verifications etc. as I considered necessary.

Trainee vis a vis auditing by myself:

As a trainee, fortunately I had freedom because I could expand scope of auditing. But when I myself did few  audit functions, as auditor, I faced several constraints like:

(a) Lack of seriousness of accounts department of clients,

(b) Lack of seriousness in audit assistants,

(c) Time constraints,

(d) Costs constraints and constraints in getting good assistants in a small organisation.

(e) Competitiveness- auditing is unfortunately considered a competitive field by many professional fellows and most of clients who want to get audit services.

(f) Overall preference of easy going approach of most of people concerned with auditing.

(g) Taking auditing as a formality – client interested to get report as quickly as possible with least checking  and reporting and ignoring many things and aspects  and assistants more interested in passing time and enjoying role of auditor with least concern of quality of work and own learning.

 Why I quit bank audit assignment and never applied again?

Sometime in 1990-91, for first time, I applied for bank audits and I was allotted audit of four branches of a nationalized bank. The appointment letter conveyed too many constraints which as an auditor were not acceptable to me. Therefore I wrote to concerned officers and informed to main statutory auditor of bank also to relax constraints like date of starting audit, completing audit, and many others I am not able to recall now, and I have no old records with me.

 I also wrote that unless these conditions and constraints are relaxed, better relieve me from assignment and consider my letter as resignation.

There was no reply from the concerned authorities and main auditors of bank.  So I was relaxed because I considered that my resignation has been accepted. However, later on I got communication asking me to furnish audit report. Then I sent copy of previous communication to which the management has not taken care to reply.   

Due to these and similar other reasons author had to discontinue auditing work after having  accepted just two audit assignments  one of which I had to leave without completing.

Author found that if you want to do complete audits, you have to consider this as non-serious assignment- sometimes a mere formality.

 With a mind-set of considering auditing as a serious work, it may not be possible to do auditing. This is also because many others are ready and willing to complete auditing in an easy going manner with casual approach which auditee also find easy to adjust with.

It is time that many of Chartered Accountants need to change mind set, to consider audit function as a serious assignment with an inner feeling of lot of responsibility. Auditing should not be considered as routine formality and source of earning mostly like a royalty.

Looking back, in view of long history of banks having NPA, repeated CDR, and particularly some recent developments I think I did right to refuse audit of four branches of a nationalised bank in 1990-91. If the banks allow sufficient time and liberty in audit functions, I hope audit function will improve and there will be less corruption, better loan disbursements and recovery and  NPA’s will be only in genuinely difficulties which will be possible to over- come and make NPA as good loan in reasonable time.

Audit assistants- future of profession

Author would like to suggest youngsters who are presently working as audit assistant and pursuing CA course to consider training period as a golden period for learning and making capital base of knowledge and experience. They must consider each assignment as a source of learning and exploration of possibilities of learning and getting chance of learn, train, and have experience. By combining assignments and studies they can make a strong capital base of knowledge and experience which will be very useful in their career and future in any capacity.

Some suggestions for better future of profession of auditing:

Clients must take auditing seriously and not mere formality. They should not be happy with auditing at low cost (fees and expenses) and quick or report on spot.

Professionals should not indulge into competition by way of lower fees and ease of auditing.

Once auditing assignment is accepted, there should be seriousness and it should not be subject to cost constraints there must be reconsideration of fees.

Auditor should not consider audit function and post of auditor as a tool of continuous contact and relationship. His abilities should only be the source of his regular contact with client.

Views expressed by author in this article are his personal views based on his experience, interactions with many concerned with business, auditing and  are in nature of ground level information received in social and professional meetings. However, author would stress that seriousness about audit functions is very much requirement and must be recognised by all concerned.