“Auditing starts when accounting ends” is a question rather than a statement. All the leading books and publications often carry this notion, and it’s a statement worth re-considering in the context of current auditing practices and the commercial situation prevailing in this modern era.
In relation to auditing, it is often said and boasted of that auditing starts when accounting ends. At least in connection with statutory audits, this should be true.
But what is found in practice, and pursued consistently, is not what should be. Audits are being done even when the accounts are not updated and completed. In fact, it is not an unusual situation where you are reviewing the general ledger while the accountant sitting nearby, on another networked system, is still updating the accounts.
Today’s accounts are no longer inked; they live in the accounting application’s database. The best practice before commencing an audit is to take out a hard copy of the trial balance — but such a practice loses its relevance almost immediately, because updates continue while you are still holding that printout as precious audit evidence.
You should not be astonished to see audited financial results released on the dot during the first week of April, because while the accounts were being written and updated in March, the statutory audits would have already started.
Hence, one should not wonder if the audit report of a concern is out just days after the close of the financial year.
There is no question of right or wrong, or good or bad, about the practice of starting an audit before accounting ends. The only caution worth mentioning is that appropriate audit evidence should be in your possession, and satisfactory procedures undertaken, so as to enable a proper expression of opinion on the true and fair view of the financial statements.
— CA. Sanjay Kadel