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These Inherent Limitations of an AUDIT are as follows:

External Auditors conduct examination on a test basis i.e. they work on a sample basis and do not check everything in the F/S.

The fact that most of the audit evidence is persuasive rather than conclusive. (audit evidence sometimes indicates what is probable, i.e. it’s not certain, ……………because most of the times evidence is based on estimates and judgments & intentions i.e. External Auditors evaluate the reasonableness of estimates made by the Management e.g.

o Provision for doubtful debts

o Provision for obsolete stock

o Provision for court case / lawsuit

o Provision for warranty

Auditors need to exercise judgment in all areas of the audit (e.g. include testing of provisions also to address Questions like

What to examine and how much procedures to perform based on the risk assessed during the audit).

Audit Report has its own limitation because of its technical language/wordings and standard format (ISA 700 Revised).

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owner: Shaun2099 - (no access) - H1 BasicConcepts.pdf, p8


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