Introduction: Definition of Auditing

Definition of Auditing:

            The word “audit” is derived from the Latin word “audire” which means “to hear”. In olden times, whenever the owners of a business suspected fraud. They appointed certain persons to check the accounts.

            THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA

                        In its publication of the Statement of Standard Auditing Practices: Basic Principles Governing an Audit (SAPI) describes audit as “the independent examination of financial information of any entity, whether profit oriented or not, and irrespective of its size or legal form, when such examination is conducted with a view to expressing an opinion thereon”

            MONTGOMERY, a leading American accountant, defines:

                        “Auditing is systematic examination of the books and records of a business or other organization, in order to ascertain or verify, and to report upon the facts regarding its financial operations and the results thereof”.

            On a reading of these definitions, one can appreciate the following points as reflected in them:

(a)    Auditing is to express an opinion on the quality of financial statements. Financial statements generally mean the balance sheet and profit and loss account. The financial statements of any entity may be subject to audit so that credence is added to them. The entity may be business organizations with profit motive or organizations with non-profit motive. They may be of any forms of organizations or companies or co-operatives where audit is compulsory of sole proprietorship or partnership where auditing is sought after by the entities voluntarily.

(b)   The opinion on financial information is expressed after careful examination of books of account, documents, records and vouchers. That is, before an opinion is pronounced evidence is gathered and tested to form the basis for framing an opinion.

From the above discussion, it is clear that the term audit generally implies audit of financial statements. Hence it can be concluded that the audit means critical and intelligent examination of facts-financial or otherwise, to give in the form of certificate or report an attestation, an expert opinion or an expert advice.