Interdisciplinary Nature of Auditing – Relationship with Diverse Subjects

Auditing is interdisciplinary in nature. It is not limited to the field of accountancy but draws concepts, theories, and techniques from multiple disciplines. These disciplines include accountancy, law, behavioural science, statistics, economics, and financial management. Together, they help the auditor form an independent and informed opinion on the financial statements of an entity.

Meaning and Need for an Interdisciplinary Approach

Auditing involves examination and evaluation of financial statements to ensure that they present a true and fair view of the financial position and performance of an entity. Since financial statements are the final outcome of various managerial, financial, and economic processes, an auditor cannot work effectively without understanding the subjects that influence those statements.

An interdisciplinary approach ensures that an auditor:

• Interprets and analyses financial data correctly.
• Understands the impact of business laws and taxation.
• Uses scientific methods such as statistical sampling.
• Evaluates the economic environment in which the business operates.
• Applies management and financial concepts to assess performance and control systems.

Thus, auditing integrates technical, legal, behavioural, and analytical knowledge to ensure reliability of financial information.

Auditing and Accounting

Auditing and accounting are closely interrelated but distinct in purpose.
Accounting is a process of recording, classifying, and summarising financial transactions to prepare financial statements. Auditing, on the other hand, is an independent review of those statements to verify their accuracy and compliance with applicable standards.

An auditor reviews the financial statements, which are the result of the accounting process, to check whether:

• Transactions have been recorded as per generally accepted accounting principles.
• Financial statements reflect a true and fair view of the entity’s financial position.
• There are any errors, omissions, or manipulations affecting reliability.

In simple terms, accounting creates the records, and auditing verifies them.

Auditing and Law

Auditing operates within a legal framework. The auditor must possess sound knowledge of business laws, company law, and taxation laws because every financial statement is prepared and audited under legal obligations.

Examples of legal relevance include:

• Companies Act, 2013, which prescribes the duties, qualifications, and responsibilities of auditors.
• Income Tax Act and Goods and Services Tax (GST) provisions affecting accounting and disclosures.
• Contract Act and Partnership Act implications in case of firms.
• Other laws such as labour laws, environmental regulations, and industry-specific acts.

A good understanding of legal provisions helps the auditor ensure compliance and report irregularities in accordance with statutory requirements. Therefore, law provides the boundaries within which auditing functions.

Auditing and Economics

Auditing is influenced by the economic environment in which a business operates. The auditor must be familiar with overall economic conditions, industry trends, inflation, exchange rates, and market competition, as these factors impact financial performance.

Knowledge of economics assists the auditor in:

• Analysing macro- and micro-economic factors affecting the client’s business.
• Understanding supply and demand conditions in the relevant market.
• Evaluating the impact of monetary and fiscal policies on business operations.
• Assessing financial results in the light of economic fluctuations.

Hence, auditing and economics are related through the understanding of how external economic forces shape internal financial outcomes.

Auditing and Behavioural Science

Human behaviour plays a significant role in auditing. Auditors interact with management, staff, and external parties to obtain information, make inquiries, and form opinions. Effective auditing requires an understanding of human psychology, motivation, and communication.

Behavioural science helps auditors in:

• Conducting interviews and obtaining reliable information.
• Assessing the integrity and competence of management.
• Observing behavioural cues that may indicate risk or concealment.
• Managing conflicts or resistance during audit procedures.

A sound understanding of behavioral science enhances the auditor’s professional judgement and ethical conduct.

Auditing and Statistics

Statistics provides tools that make auditing more scientific and efficient. Since it is not possible to check every transaction in large organisations, auditors use statistical methods to draw samples and reach conclusions with reasonable assurance.

Applications of statistics in auditing include:

• Sampling techniques for selecting representative transactions.
• Estimation and probability theory to assess errors and deviations.
• Trend analysis for comparing data across periods.
• Data interpretation using averages, ratios, and correlation.

Thus, statistical and mathematical knowledge helps auditors in forming conclusions based on evidence rather than assumptions.

Auditing and Mathematics

Mathematics is essential for performing calculations, ratios, and reconciliations during audit procedures. It supports the auditor in verifying computations, checking analytical procedures, and confirming arithmetical accuracy of records.

For example:

• Verification of depreciation, interest, and tax computations.
• Analysis of cost and revenue variances.
• Calculation of financial ratios for performance evaluation.

In this way, mathematics strengthens the logical and analytical aspect of auditing.

Auditing and Data Processing

Modern auditing increasingly involves Electronic Data Processing (EDP) systems. With the growth of digital accounting, auditors must be familiar with computer-based processes, database structures, and IT controls.

Knowledge of data processing helps in:

• Understanding how transactions are recorded electronically.
• Evaluating system security and internal controls.
• Using computer-assisted audit techniques (CAATs).
• Detecting manipulation or unauthorised access in digital records.

Auditing in the EDP environment has become a distinct discipline, requiring both technical and analytical expertise.

Auditing and Financial Management

Financial management focuses on the effective utilisation of funds within an organisation. Since auditing evaluates financial statements, the auditor needs to understand principles of financial management to interpret results accurately.

Important areas where financial management knowledge is useful include:

• Working capital management – analysing liquidity and cash flow.
• Capital budgeting – evaluating investment decisions.
• Ratio analysis – measuring profitability, solvency, and efficiency.
• Funds flow and cash flow statements – assessing financial health.
• Risk management and cost of capital – understanding financing structures.

A strong understanding of financial management allows the auditor to comment meaningfully on the organisation’s financial performance and stability.

Auditing and Production

Production knowledge is necessary in audits of manufacturing entities. Understanding the production process helps auditors assess cost systems, inventory management, and efficiency of operations.

Auditors apply this knowledge to:

• Verify production records and stock levels.
• Check cost allocation and overhead absorption.
• Evaluate the link between production volume and profitability.
• Ensure compliance with quality control and safety norms.

Such understanding ensures a more effective audit of manufacturing and production-oriented businesses.

Ethical Dimensions in Auditing

Ethics forms the foundation of auditing practice. The auditor’s responsibility is not only to verify figures but also to maintain integrity, objectivity, confidentiality, and professional behaviour. Knowledge from behavioural science and moral philosophy supports ethical decision-making in audit situations involving conflicts of interest, pressure from management, or disclosure dilemmas.

Ethical auditing involves:

• Acting in public interest and maintaining independence.
• Avoiding bias, prejudice, or undue influence.
• Reporting honestly and transparently.
• Upholding confidentiality of client information.

An ethical auditor enhances the credibility of the profession and builds public trust in financial reporting.

Conclusion

Auditing, by its nature, is a multidisciplinary profession that integrates knowledge from accounting, law, economics, statistics, behavioural science, data processing, financial management, and production. Each discipline enriches the auditor’s understanding of the entity’s operations and environment. A professional auditor must therefore possess diverse knowledge and analytical skills to ensure that financial statements present a true and fair view and comply with applicable laws and standards.