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Chapter One Accounting firms usually classify their employees as JUNIORS and SENIORS. In large firms there may be several different STAFFS located in different cities. A staff will be under the supervision of a SUPERVISING or MANAGING SENIOR and he in turn may be under the direction of a PARTNER of the firm.

THE WORK OF THE JUNIOR At first a junior will usually be assigned to work under the direct supervision of a senior who is familiar with the different phases of the field work and he will be instructed as to just what to do and how to go about it. In due time, however, he will be sent out only with general instructions from the senior who may not accompany him and he will be expected to know how to proceed with the work.

Policies of the firm must be thoroughly understood. They will vary but every firm has certain policies that it expects all employees to adhere to closely. Juniors, seniors, the managing senior, and even a partner will be required by all firms to prepare and keep a set of WORKING PAPERS showing a complete record of work completed. The arrangement and scope of these working papers will naturally vary. They will be made up of SCHEDULES containing records and figures arranged in a systematic order so as to show conclusions; how the conclusions were arrived at; why, in some cases, the figures differ from the book figures; and to show items not appearing in the books of account at all.

Briefly the duties of the junior will be the verification of bank and cash balances, checking footings, checking and testing postings, vouching entries, verifications of securities, taking Trial Balances, checking inventories, making schedules and a variety of similar work.

In accounting terms the work to be performed is referred to as an ENGAGEMENT and the party for whom it is to be done is spoken of as a CLIENT.

In undertaking an engagement it is essential to keep in mind the work to be performed whether an AUDIT, an EXAMINATION or an INVESTIGATION; and if an audit, whether it is to be a BALANCE SHEET AUDIT or a DETAILED AUDIT. A Balance Sheet audit is frequently referred to as a PARTIAL AUDIT.

THE WORK OF THE SENIOR Naturally the senior has certain responsibilities that do not fall on the junior. He may have one or several juniors under his supervision depending upon the nature and extent of each engagement. He will be expected to plan and direct their work, decide difficult and complex questions arising from time to time, and make a complete report of each engagement completed, submitting all necessary working papers arranged to show in detail the work performed. As a rule he will not be expected to prepare final reports for the client, this being done in the office at the direction of a supervising senior or a partner of the firm. However, the senior who expects to become a manager or a partner of the firm should learn to prepare certificates and reports from a set of working papers.


Minor Objects. The minor objects of an audit may be classified under two distinct heads.

(a) Detection and prevention of Fraud.
(b) Detection and prevention of Errors.

Fraud. In the beginning of professional auditing, fraud was considered the principal objective and an auditor was employed only when fraud was suspected by the management. Consequently when an auditor appeared in an office and began his investigation, the bookkeepers began to wonder who was to be the victim and in most cases the auditor was looked upon as a sort of detective. Today fraud is considered only as a minor reason and not a principal reason for an audit,t hough it is often detected by the auditor regardless of what may be the chief reason for the audit. Either a continuous audit or a periodical audit will go a long way toward the prevention of fraud and embezzlement.

Errors. From the standpoint of an audit there are certain different classes of errors and the auditor should be able to distinguish between them without any difficulty. Errors may be divided into five general classes as follows:

Errors of Principle. Errors of Omission.
Errors of Commission. Clerical Errors.

Offsetting Errors. Errors of principle and commission are very similar and so important that they must be detected by the auditor. The most common errors of this class are due to the inability of the bookkeeper to distinguish between capital and revenue expenditures. Frequently items are charged to Expense which should be charged to Property accounts and vice versa.

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