## Uses and Objectives of Audit

### Mnemonic: DOG Loves HIM

Letter	Use / Objective	Explanation
D	Detect fraud or error	Primary objective — to detect fraud, errors, or both
O	Operations / Controls	Reviews existence and operations of internal controls; useful for pointing out control deficiencies
G	Government authorities	Audited accounts assist government in regulation, taxation, and oversight
L	Lenders	Banks and financial institutions rely on audited accounts when making lending decisions
H	High quality information	Audited financial statements provide higher-quality, reliable information to all users
I	Interests safeguarded	Interests of various stakeholders (shareholders, creditors, public) are protected
M	Moral check on employees	Knowledge that accounts will be audited acts as a deterrent against employee fraud

### Why This Matters

Audit serves multiple stakeholders beyond management. This breadth of use explains why audit is mandatory for certain entities — public interest is at stake.

Worked example

### Example 1

L — Lenders use: A bank considering a ₹5 crore term loan to ABC Ltd. relies on ABC's audited financial statements. Without an audit, the bank has no reliable basis to assess the borrower's financial health and cannot make a confident lending decision.

### Example 2

M — Moral check: An accounts clerk knows that the company's books are subject to annual statutory audit. This knowledge deters the clerk from manipulating petty cash records, since discrepancies are likely to be discovered.

⚠️ Common exam mistakes

Limiting audit objectives to fraud detection alone — audit has seven distinct uses captured in DOG Loves HIM
Thinking 'detect fraud' means the auditor must find all frauds — fraud detection is an objective but subject to inherent limitations
Overlooking the moral check function — audit acts as a preventive deterrent, not just a detective mechanism

Reference:

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Uses and Objectives of Audit — DOG Loves HIM

Worked example

⚠️ Common exam mistakes