The word ‘audit’ is derived from the latin word ‘audire’ which means to hear. In the olden times, when frauds or errors were suspected as regards receipts and payments in business or to verify tax amount payable to the king, explanations would be heard from persons responsible for keeping accounts.
Today, audit is more than just cash verification. It is reporting about the financial position of an organization as disclosed by the Profit and Loss account and Balance Sheet.
Following are some definitions of Auditing:
“Auditing is a systematic examination of the books and records of a business or the organization in order to ascertain or verify and to report upon the facts regarding the financial operation and the result therof” (by Montgomery) “An audit may be said to be such an examination of the books, accounts and vouchers of a business as well enable the auditor to satisfy that the Balance Sheet is properly drawn up, so as to give a true and fair view of the state of affairs of the business and whether the profit and loss for the financial period according to the best of his information and the explanations given to him and as shown by the books, and if not, in what respect he is not satisfied” (Spicer and Pegler)
“An audit is an examination of accounting records undertaken with a view to establishing whether they correctly and completely reflect the transactions to which they relate. In some instances, it may be necessary to ascertain whether the transactions themselves are supported by authority” (Lawrence R. Dicksee) “Auditing is concerned with the verification of accounting data, with determining the accuracy and reliability of accounting statement and reports.” (R.K. Mautz) Significance of Auditing:
1. Satisfaction and Confidence: of business operations and reliability of results disclosed 2. Errors and Frauds: are detected in audit process. Also, as audit will take place, people are scared to...