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Definition of Auditing


									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 check the accounts and hear the explanations given by the person
responsible for keeping the account and funds. In those days, the audit is done to find out
whether the payments and receipt are properly accounted or not.

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

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 a 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 a concern. Audit is concerned with 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. Preparation of account is not the part of auditing. An
       auditor, using his appointing authority, needs to check throughly, whether the Profit and
       Loss account and the Balance Sheet have been properly drawn up and revel 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.

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