In consequence, auditing may and will extend to every type of undertaking which produces accounts, and will include therefore:

a) Clubs;

b) Charities (assuming an audit is not in any event statutory);

c) Sole traders; and

d) Partnerships

It may also extend to forms of financial statement other than the annual reported figures where those responsible for the statement, or those to whom the statement is made, wish an independent opinion to be expressed as to whether it gives a true and fair view. Examples would include:

a) Summaries of sales in support of a statement of royalties’ payable where goods are sold under licence;

b) Statements of expenditure in support of applications for regional development or other governments grants; and

c) The circulation figures of a newspaper or magazine, used when soliciting advertising.

In all such audits the auditor must have regard to any regulations concerning financial statements which are contained in the internal rules or constitution of the undertaking. Examples of the regulations which would be essential reference material for the auditor in such assignments would include:

a) The Rules of Clubs, Societies and Charities

b) Partnership agreements.

Audit of Partnerships

Advantages of an audit to a partnership

The audit of a partnership is not normally required by statute and so the auditor must agree with the client what his rights and duties are going to be. The auditor must obtain written confirmation of his terms of engagement and must take care to clearly distinguish between audit and accountancy work and ensure that the client appreciates such distinction.

In addition to the advantages common to all forms of audit, namely, the verification of accounts and the possible detection of errors and fraud, the audit of the accounts of a partnership may also be seen to have the following advantages:

a) It will provide a convenient means of settling accounts between the partners, thus avoiding the possibility of future disputes.

b) The auditor may be able to make useful comments on the firm's accounting and control systems, where necessary making recommendations as to how areas of weakness could be eliminated.

c) The settlement or adjustment of accounts between partners on the occasion of any change in the partnership structure will be facilitated where audited accounts are available.

d) Where audited accounts are available this will perhaps make them more readily acceptable to the income tax authorities’ inland revenue when it comes to agreeing an individual’s partner's liability to tax. The partners may well wish to take advantage of the auditor's services in the additional role of tax advisor.

e) The sale of the business or the negotiation of loan or overdraft facilities may well be facilitated if the firm is able to produce properly prepared and audited accounts.

f) An audit on behalf of a 'sleeping partner' is highly advisable since generally such a person will have little other means of checking the accounts of the business, or confirming the scale of profits due to them.

Apart from the advantages discussed above, which would be peculiar to a partnership, similar advantages may be found in the audit of the accounts of a sole trader, club or charity. Whatever the nature of the business, the auditor will find himself concerned with compliance with Auditing Standards.