Limitations of Auditing
- Rely on Experts
An Auditor has to rely on experts like engineers, valuers and lawyers for estimation and valuation of fixed assets and estimation of contingent liabilities.
- Efficiency of Management
An Auditor does not comment on the efficiency of management working in client organization; no comments on future performance of an organization can be made through audited financial statements.
- Checking of All Transactions
It is not possible for an Auditor to check all business transactions especially in big organizations where the number of transactions is very high. An Auditor has to rely on sampling and test checking.
- Additional Financial burden
An organization has to bear additional financial burden on account of any fees and other such expenses for conducting an audit.
- Not Easy to Detect Some Frauds
It is not easy for an Auditor to detect deeply laid frauds like forgery, misstatements and non-recording of transactions.
- Cost Factor
A very thorough and detailed audit would be a costly affair. It is not cost effective. So the auditor has to limit the scope of his audit and use techniques like sampling and test checking.
- Time Factor
Auditors generally work on a very specific timeline. Sometimes this is due to statutory requirements. This means he has to audit a whole year’s accounts in a few weeks. Hence insufficient time is one of the main limitations of auditing.
- Inconclusive Evidence
Generally, the audit evidence the auditor collects is persuasive in nature, not conclusive in nature. So there is never cent percent conclusive evidence in most cases while auditing.