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Explanatory Notes

>> November 15, 2012

When auditor starts the process of auditing, he sees all the accounts of businessman. If he finds that many facts are out of his understanding, he will make its notes and send these notes to businessman for clarification  All these notes are called explanatory notes.

Auditor may stop his auditing work up to the getting of clarification because he may think that all these uncleared facts are important for the correctness of accounts. If he will audit without the understanding of these facts, his auditing will not be sufficient as per auditing standards.

For Example

A Chartered Accountant has taken the responsibility of auditing of ABC Company. He verified that accounts are true and fair but actual cash is very less than book cash. For this, he will send the note to the Accountants of ABC Company for its answer. So, this note is explanatory note.

Related : Qualificatory Notes 

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