People tend to erroneously think that auditing is a sub-division of accounting probably because that is how it was introduced to them and every auditor as we know is also an accountant. But, every accountant is not an auditor. Auditing has its roots elsewhere. The relationship of auditing and accounting is close but they are not the same.
Accounting is concerned with the collection, classification, summarization and communication of financial information. It involves the measurement and communication of business events and conditions as they affect the particular enterprise. The task of accounting is to provide a detailed financial information that will be manageable and understandable about an enterprise. Auditing does more of these things.
Auditing is the independent examination and expression of opinion on the financial statements of an enterprise by an appointed or employed auditor in pursuance of that appointment and in compliance with the relevant statutory obligation, hence the role of internal auditors in stock taking. It involves critical and thorough investigation of the financial books prepared by the accountants as to whether those financial statement show a discipline department on logic and accounting is part of its utilities.
An auditor must exercise reasonable care and skill in carrying out his audit work of stock taking.
This was fully stated in the case of RE KINGSTON COTTON MILL (1896). This case considered the degree of care and skill required of an auditor. It stipulated than an auditor is a watch dog and not a blood bound. That, it is the duty of an auditor appointed to carry out the work of stock taking to ensure that skill, care and caution which a reasonable, competent, careful and cautious auditor will use has been applied in stock taking. The auditor has to ensure in stock taking or physical verification of stock either by full count or measurement as incase of bulky stock taking that the stock taking with the bin card record.
Stocktaking could be done in three ways namely:
a. Counting of stock at the end of the year, before the end of the year or after the end of the year
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