Disadvantages or Demerits of Auditing

In this tutorial, we will learn about the disadvantages or demerits of auditing has to depend upon books of accounts and other records presented before him. He never thinks of the intentions of those who have prepared them.

The auditor has to depend upon the book of accounts and other records presented before him. He never thinks of the intentions of those who have prepared them. If these intentions are malaise and there is manipulation in the accounts, the auditor will not be able to bring them to light. He has also to depend upon experts’ opinions as he is not an expert in all fields like technical, legal, or others. It isn’t easy to find the accounts as complete and genuine everywhere. Some other limitations of an audit are as follows:

Higher Cost Burden:

•  Due to the higher cost burden, the auditor limits his scope of work to selective testing and sampling; thus, in-depth checking of the book of accounts is not possible.

Based On Test Checks:  

An auditing exercise is based on test checking. Inferring a result based on test check always need to be true.

Based On Information Provided By The Management

The audit opinion is based on the management’s information. Hence outsiders cannot entirely rely on the auditor’s report.

Based On Estimates: 

In an inherent part of the accounting process, and no one, including auditors, can foresee the outcomes of uncertainties. Estimates range from the allowance for doubtful accounts and an inventory obsolescence reserve to impairment tests of fixed assets and goodwill. An audit cannot add exactness and certainty to financial statements when these factors do not exist.

Inconclusiveness Of Evidences:

The evidence obtained by an auditor is persuasive rather than conclusive. For example, an architect’s certificate of valuation for a newly constructed building of a client may not be convincing evidence of the correct value of a building.

Insufficient Time: 

Generally, an auditor needs to release the report up to a specified timeline. Sometimes this timeline becomes a constraint for an auditor in carrying out the auditing exercises. Moreover, there is a relatively short time available for resolving uncertainties existing at the financial statement date.

The problems are being complicated day-by-day unless an auditor is familiar with the recent changes; he cannot perform his functions with ability and prudence. Hence, capable persons are needed in every country to complete the audit work so that the business may be directed appropriately and administered. It will depend upon the cooperation, especially between the businessman, the government, and the person conducting an audit.