Auditing

The term Auditing originated from the Latin word “Audire” which means “to hear”. Auditing is the work of checking accuracy of the books of account. It is described as an examination of the books and vouchers, balance sheet and profit and losses account of a business organization. In olden days, when the proprietor suspected fraud, he used to appoint an impartial person in order to verify the accounts. Those persons hear these accounts from the accountant and used to give impartial judgment over the accounts. Such persons were called as Auditors.  Earlier, the audit of the accounts was confined to public accounts only. With the development of trade and commerce the need for recording of transactions and verification of such of transactions were felt by businessmen.  The audit in its present form is due to large scale production after the industrial revolution.

The post industrial revolution period showed development in the field of banking, finance, commerce, transportation technology, etc. All these transactions contributed to a lot for the growth of a new form of organization of business called as Joint Stock Company. In Joint Stock Company the ownership is separated from the management. Share holders of a Joint Sock Company are drawn from far off places. They are very much interested in knowing about the proper utilization of their investments. As such they need complete verification of accounts by an impartial person called Auditor.

The Objectives of Auditing

The main objective of auditing or audit is to examine the books of accounts and other records so as to find out whether the books of accounts have been maintained as per the provisions   of act or principles of accounting. For this purpose auditor has to compare all the entries in the books of accounts with proper documentary evidence.

Questionnaire:

• What is Auditing and State the objectives of auditing
• Explain the history of auditing?