The field of auditing as a discipline in simple words involves review of various assertions; both in financial as well as in non-financial terms with a view to prove the variety of such assertions and expression of opinion auditor on the same. Thus, it is logical and natural that the functions of audit can be performed if and only if the person also possesses a good knowledge about the fields in respect of which he is conducting such a review.
i. Auditing and Accounting.
Auditing and accounting are closely related with each other as auditing reviews the financial statements which are nothing but result of the overall accounting process. It naturally calls on the part of the auditor to have a through and sound knowledge of generally accepted principles of accounting before he can review the financial statements. In fact, auditing as a discipline is also closely related with various other disciplines as there is lot of linkages in the work which is done an auditor in his day to day activities. To begin with, it may be noted that the discipline of auditing itself is a logical construct and everything does in auditing must be bound the rules of logic. Ethical percepts are the foundation on which the foundation of the entire accounting profession rests. The Knowledge of language is also considered essential in the field of auditing as the auditor shall be required to communicate, both in writing as well as orally, in day to day work.
ii. Auditing and Law.
The relationship between auditing and law is very close one. Auditing involves examination of various transaction from the view point of whether or not these have been properly entered into. It necessitates that an auditor should have good knowledge of business laws affection the entity. He should be familiar with the law of contracts, negotiable instruments etc. The knowledge of taxation law is also in inevitable as entity is required to prepare their financial statements taking into account various provisions affected various tax laws. In analyzing the impact of various transaction particularly from the accounting aspect, an auditor ought to have a good knowledge about the direct as well as indirect tax laws.
iii. Auditing and Economics
As is well known, accounting is concerned with accumulation and presentation of data relation to economic activity. Though the concept of income as put forward economists is different as compared to the accountant‟s concept of income, still there are lot of similar grounds on which accounting has flourished. From the auditing viewpoint, the auditors are more concerned with Microeconomics rather than with the Macroeconomics. The knowledge of Macroeconomics should include the nature of economic force that effect the firm, relationship of price, productivity and the role of Government and Government regulations. Auditor is expected to be familiar with the overall economic environment in which his client is operating
iv. Auditing and Behavioral Science
The discipline of behavior science is also closely linked with the subject of auditing. While it may be stated that an auditor, particularly the financial auditor, deals basically with the figures contained in the financial statements but he shall be required to interest with a lot of people in the organization. As against the financial auditor, the internal auditor or management auditors are expected to deal with human beings rather than financial figures. As one of the basic elements in designing the internal control are personnel. There it has been made amply clear that howsoever a sound internal control structure is designed, it cannot work until and unless the people who are working in the organization
are competent and honest. The knowledge of human behavior is indeed very essential for an auditor so as to effectively discharge his duties.
v. Auditing and Statistics & Mathematics
With the passage of time, test check procedures in auditing have become part of generally accepted auditing procedures. With the emergence of test check procedure, discipline of statistics has come quite close to auditing as the auditor is also expected to have the knowledge of statistical sampling so as to arrive at meaningful conclusions. The knowledge of mathematics is also required on the part of auditor particularly at the time of verification of inventories.
vi. Auditing and Data Processing
Today, organization are witnessing revolution in the field of data processing of accounts. Many organizations are carrying out their financial accounting activities with the help of computers, which can document, record, collate, and allocate the value accounting data and information in every large quantity at very high speed. The dependence on the accuracy of the programme instructions given today, the computer is able to carry out each of these activities with complete accuracy. With such phenomenal growth, in the field of computer sciences, the auditor should have good knowledge of the components, general capability of the system and the related terms. In fact, EDP auditing in itself is developing as a discipline in itself.
vii. Auditing and Financial Management
Auditing is also closely related with other functional fields of business such as finance, production, marketing, personnel and other general areas of business management. With the overgrowing auditing, the financial services sector occupies a dominant place in our system. While in general terms, the auditor is expected to have a fair knowledge of the institution that comprise the market place. The knowledge of various institutions and Government activities that influence the operations of the financial market are also required to be understood an auditor.
viii. Auditing and Production
Regarding the production function, it may be stated that a good auditor is on who understand the client and his business. While carrying out the audit activity, the auditor is required to evaluate transactions for the accounting aspect in relation to the process though it has passed through as accounting for by-product, joint products may also require to be done. The knowledge of process shall become more essential in case of an internal auditor. The auditor shall also require understanding the cost system in operation in the factory and assessing whether the same is adequate for the particular company. The understanding of the terminology of the production shall enable an auditor to communicate with production employees in connection with his work. On the similar pattern the auditor is also expected to have good understanding about the marketing, personnel and other general business management areas.