Introduction: Origin of Audit

Origin of Audit:

The origin of audit may be traced to middle ages, but the audit in the present sense can be traced after the introduction of large-scale production, in consequence of Industrial Revolution, during the 18^th century. Before this era, goods were produced bt individuals, of\n small scale. There was not much capital. The individual, who invested the capital, usually himself maintained the accounts and, therefore, there was no necessity of checking them.

Difference between Book-keeping, Accountancy, and Auditing:

1.                  Book-keeping is an art of recording the business transactions in the books of original entry and the ledgers. On the other hand accountancy means the compilation of accounts in such a way that one is in a position to know the state of affairs of the business. But auditing means the verification of book entries and accounts to fin out their accuracy. It is neither book-keeping, nor accountancy.

2.                  the spade work is done by the book-keeper and the accountant while the finishing touch is given by the auditor of, as has been said, that where the work of an accountant ends, the work of an auditor begins.

3.                  sometimes an auditor is asked to prepare from a set of books the trial balance, profit and loss accountant and balance sheet in which case he would be acting as an accountant and he would not be required to give his certificate at the foot of the balance sheet. He has simply to put his signature in token of his having prepared such a profit and loss account and balance sheet. on the other hand, an auditor has not to prepare the trial balance, profit and loss account and balance sheet. He is to report whether the profit and loss account and the balance sheet prepared by the accountant exhibit a true and fair view of the state of affairs of the concern and in the case of a company, they are drawn up according to the Companies Act.

4.                  A book-keeper and an accountant has to record the transactions in the books of accounts while an auditor has to check and verify such transactions and accounts and send a report to the persons who appointed him.