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Definition of Auditing

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Helna is a postgraduate in Commerce who now working as a Manager and also love sharing informative information with her readers.

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 thereof.

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 thereof.

Origin of Audit

The word 'Audit' is originated from the Latin word 'audire' which means 'to hear'. In the earlier days, whenever there is suspected fraud in a business organization, the owner of the business would appoint a person to examine the accounts and hear the explanations given by the person responsible for keeping the account and funds. In those days, the audit is carried out to find out whether the payments and receipts are properly accounted for or not.

The objective of modern-day accounting is not merely for the verification of cash but to report the financial position of the undertaking as disclosed by its Balance sheet and Profit and Loss account.

Definition of Auditing

A precise definition of the term 'Auditing' is difficult to give. Some of the definitions given by different authors are as follows:

According to Montgomery, a well-known author, "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 thereof."

Spicer and Pegler expanded the above definition as follows:

"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 or 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."

According to Lawrence R. Dicksee, "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."

R. K. Mautz defines auditing as being "concerned with the verification of accounting data, with determining the accuracy and reliability accounting statement and reports."


It is clear from the above definitions that auditing is the systematic and scientific examination of the books of accounts and records of a business so as to enable the auditor to satisfy himself that the Balance Sheet and the Profit and Loss Account are properly drawn up so as to exhibit a true and fair view of the financial state of affairs of the business and profit or loss for the financial period. The Auditor will have to go through various books and accounts and related evidence to satisfy himself about the accuracy and authenticity to report the financial health of the business.


Difference Between Auditing And Accounting.

The role of accountancy is to record the transaction in the book of accounts, extraction of trial balance, preparation of Trading and profit, and loss account, and balance sheet, etc. On the other hand, auditing is the examination of books of account and checking the financial statement for the purpose of finding out the true and fair position and results of operation of concern. The audit is concerned with a detailed examination of the complete accounting records, but it does not involve the preparation of accounts.

If the auditor is asked to write the books of accounts, extract an agreed trial balance and profit and loss account and Balance sheet, he would be doing the work of an accountant and not the work of an auditor. The preparation of an account is not part of auditing. An auditor, exercising his appointed authority, needs to check thoroughly, whether the Profit and Loss Account and the Balance Sheet have been properly drawn up and revel in the 'true and fair view' of the state of affairs and results of operation of the concern and report it to the parties interested.


Auditing without the prior existence of accounts is not possible. When the accountant finishes his work, the auditor starts his work.

This content is accurate and true to the best of the author’s knowledge and is not meant to substitute for formal and individualized advice from a qualified professional.

© 2010 Helna

Comments

MOHAMED MOHAA DIDO on June 13, 2019:

Very interesting

karo on September 13, 2016:

An excellent piece.

Santanu on June 22, 2015:

thanks its a nice definition

Ashiya khan on February 08, 2015:

Thanks & nice definition

raghu on October 25, 2014:

good information

prem on August 20, 2014:

thanku

prem on August 20, 2014:

thanku

sangam on May 27, 2014:

Thnks

M on February 10, 2014:

what are the steps of modern day auditing?

Can anyone help

kultaran on January 21, 2014:

nice definition

amina malik on November 28, 2013:

Thanks for definition but i want more

Teslim from kwara,nigeria on November 10, 2013:

Plz i just want to know why aditing is included as a course in accounting department in an institution,

suraj on May 04, 2013:

thanks... really helpful..

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I'm student of B.Com, the following definition help me to get clear picture. Thanks a lot

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UDUS

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madiha on January 16, 2012:

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Tania on December 25, 2011:

i dont like this............

kavi on December 17, 2011:

the definition is useful, thanks for that. Something which is missing, the year you publish that article, would be great if the year was present.

IJR112 on December 08, 2011:

I was an auditor for 4 years. This is a good overview of auditing. Thanks.

marwa mohabat on December 05, 2011:

thanhs for ur useful definition

tichman on November 08, 2011:

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vikas mishra on November 06, 2011:

thnx

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SRI on October 10, 2011:

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baloch on September 26, 2011:

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IMRAN HAMEED on September 18, 2011:

THANKX FOR EASY DEFINITION .

IMRAN HAMEED on September 18, 2011:

THANKX FOR EASY DEFINITION .

M.Akram on September 17, 2011:

I like this page. Thanks

Arif on September 16, 2011:

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TARSAME on September 15, 2011:

thanks aton man it was damn helpful

manisha on September 01, 2011:

thaks for giving an actual defination of audting

prashant on August 25, 2011:

thanks...............

maryam on July 31, 2011:

thnxxx

shreya on July 06, 2011:

i really like it it help me a lot........

Danish Haider on May 05, 2011:

thanks!! for giving us the exact definition of Auditing..

Aabera on April 25, 2011:

thanks to give definition

Francis on March 10, 2011:

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webgain from Delhi, India on March 02, 2011:

lamsam good writing skill.. keep it up

monty on February 26, 2011:

thanks dud..........................

Helna (author) on February 16, 2011:

Thanks all for your kind visits and comment.

It is nice to know that you are benefited by the writeup.

Thanks

Makunda Mirdha, Sambalpur, Odisha, India on February 03, 2011:

very good definition, I like it & it will helps many

wasim on January 25, 2011:

i need it

M.Basit on December 31, 2010:

well done

billrobinson from CA, USA on December 08, 2010:

Thanks for the information.

MBag on September 07, 2010:

very informative

Expert on September 04, 2010:

well done

Expert on September 04, 2010:

well done

M yasir on August 18, 2010:

CONCERNED WITH THE VERIFICATION OF ACCOUNTING DATA DETERMINING THE ACCURACY AND RELIABILITY OF ACCOUNTS STATEMENT AND REPORTS.

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