Meaning, Definition and Features of Audit, Auditing Notes B.Com 6th Sem CBCS Pattern

Meaning and Definition of Audit
Features of Audit
Auditing Notes B.Com 6th Sem CBCS Pattern

Meaning and Definition of Audit or Audit Begins where Accounting Ends 

The word audit is derived from the Latin word “AUDIRE” which means to hear. Initially auditor was a person appointed by the owners to check account whenever the suspected fraud, he was to hear explanation given by the person responsible for financial transactions. Emergence of joint stock companies changed the approach of auditing as ownership was pestered from management. The emphasis now is clearly on the verification of accounting date with a view on the reliability of accounting statement.

In the words of Spicier and Pegler ,“An audit is such an examination of the books, accounts and vouchers of a business as it enable the auditor to satisfy that the Balance Sheets is properly drawn up, so as to give a true and fair view of the state of the affairs of the business and whether the profit and loss accounts gives a true and fair view of the profit or loss for the financial period according to the best of his information and explanations given to him and as shown by the books, and if not, in what respects he is not satisfied”. 

In the words of Montgomery, ”Auditing is a systematic examination of the books and records of a business or other organization, in order to ascertain or verify and report upon the facts regarding its financial operation and the result thereof”. 

In the words of Lawrence R. Dicksee, ”An audit is an examination of records undertaken with a view to establishing whether they correctly and completely reflect the transactions to which they relate. In some circumstances it may be necessary to ascertain whether the transactions are supported by authority. 

In the words A.W. Hanson, ”An audit is an examination of such records to establish their reliability and the reliability of statement drawn from them”. 

In the words of R.B. Bose, ”Audit may be said to the verification of the accuracy and correctness of the books of accounts by independent person qualified for the job and not in any way connected with the preparation of such accounts”. 

The main purpose of Auditing or object is to find the opinion of an auditor about the correctness and reliability of accounts and the financial position of the business concern. For this purpose auditor has to check the arithmetical accuracy of the books of account and to find out that whether the transactions entered in the books of account are correct or incorrect. This is done by various methods like inspecting comparing and checking. So all that work that is done by the auditor ensures him that figures are facts.

From the above definitions it is clear that the auditor’s basic duty is to examine the accounts and its arithmetical accuracy. He must ensure than the financial statements depicts true and fair view of the state of affairs of the business. Since, Auditing is a full and critical examination of the books of accounts to find out their accuracy. That is why it is said that auditing begins where accounting ends.

Features of Auditing

a.       Audit is a systematic and scientific examination of the books of accounts of a business;

b.       Audit is undertaken by an independent person or body of persons who are duly qualified for the job.

c.       Audit is a verification of the results shown by the profit and loss account and the state of affairs as shown by the balance sheet.

d.       Audit is a critical review of the system of accounting and internal control.

e.       Audit is done with the help of vouchers, documents, information and explanations received from the authorities.

f.        The auditor has to satisfy himself with the authenticity of the financial statements and report that they exhibit a true and fair view of the state of affairs of the concern.

g.       The auditor has to inspect, compare, check, review, scrutinize the vouchers supporting the transactions and examine correspondence, minute books of share holders, directors, Memorandum of Association and Articles of association etc., in order to establish correctness of the books of accounts.