BCom Notes Part II Auditing Introduction of Auditing and Accounting

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Introduction of Auditing

The word Audit is derived from the Latin word audire, which means to hear. Originally, it was customary for person responsible for maintenance of accounts go to some impartial and experienced persons, ordinarily judges who used to hear these accounts and express their opinion about their correctness or otherwise such persons were known as “Auditors”. Thus the term auditors mean literally hearer i.e., one who hears and is used ever since the days when public accounts were accepted and approved on the basis of hearing the accounts read.

Auditing is an important professional task carrying heavy responsibility and calling for commensurate skill and judgement. Keeping in view the definitions of various authors we may define the word Auditing as:

Auditing is an examination of the accounting books and the relative documentary evidence so that an auditor may be able to find out the accuracy of figures and may be able to make report on the balance sheet and other financial statements that have been prepared from there.

Definitions of Auditing

Definitions of Audit

It is a bit difficult to give a precise definition of word audit in a word or two, Originally its meaning and use was confined merely to cash audit and the auditor had to ascertain whether the person responsible for the maintenance of accounts had properly accounted for all the cash receipts the payment on behalf of his principle. But the word, audit, had a wide usage and it now means a through scrutiny of the books of accounts and its ultimate aim is to verify the financial position position disclosed by the balance sheet and the profit and loss account of a company. The following are the some of the definitions of audit given by some writers:

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.

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.

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.

F.R.M De Paula

An audit denotes the examination of Balance sheet and profit and loss accounts prepared by others together with the books, accounts and vouchers relating there to in such a manner that the auditor may be able to satisfy himself and honestly report that in his opinion, such Balance sheet is properly drawn up so as to exhibit a true and correct views of the state of affairs of the particular concern according to the information and explanations given to him and as shown by the books of accounts.

A.W. Hanson

An audit is an examination of such records to establish their reliability and the reliability of statement drawn from them.

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.

Taylor and Perry

An audit is an investigation by an auditor into the evidence from which the final Revenue Accounts and Balance sheet or other statement of an organization have been prepared, in order to ascertain that they present a true and fair view of the summarized transactions for the period under review and of the financial state of the organization at the ending-date, so enabling the auditor to report thereon.

Introduction of Accounting

Accountancy Begins where Book-keeping ends. It means that an accountant comes into the picture only when the book-keeper has done his job. He has to go behind the work of a book-keeper and satisfy himself that the transaction have been properly agree and then to prepare profit and loss accounts and balance sheet after making the necessary adjustment and the rectification. In short, it can be said that he has to prepare summary in the form of trial balance and make analysis after preparing the balance sheet and profit and loss Accounts. An Accountant is expected to be an expert in the accounting in the accounting procedures, as he has to examine analytically the final accounts. So

Accounting is concerned with the preparation of the final accounts to show the results of the business at the end of the particular period.