Enhancing Financial Statement Audit

Financial earnings manipulation reporting has currently attracted attention. This study starts with an introductio-n and overview on the concept of auditing. Securities and Exchange Board, India [SEBI] functions as the regulatory board of the capital market in India will be detailed. In describing, two main types of discrepancies will be introduced, namely those resulting from defective financial reporting and from abuse or misappropriation of assets. The study also detects some of the main reasons behind the auditors' failures in detecting defective financial statements. Technically, the main reasons for failures, include analytical review application procedures as sufficient audit evidence; deficiencies in audit risk model and risk evaluation as to internal control; audit failure in revenue recognition and the involved party transactions disclosure. The auditors' main ethical issues, independency and the quantum of non-audit services will be defined. Finally, based on the identified reasons, some solutions are suggested to enhance auditing,in identifying financial discrepancies.