What Is The Meaning Of Auditing?

The meaning of auditing defined by dictionary.com as 'An official examination and verification of accounts and records, especially finance'.

This finance audit is usually carried out for different institutions at the end of the fiscal year and it is law that there is an audit carried out. It is done to ensure that the company has conducted it's finances for the year in a way that complies with the law and is also correct so that any mistakes do not result in the company paying too much or too little tax.

It is essential that the audit is carried out by an independent party and that the audit is in no way bias towards the company and the records that they keep.

A few of the main things that an auditor looks out for when looking into the accounts of a company and checks that they are all above the law are;

• Incoming money

Has this had tax applied where necessary? Can all incoming money be accounted for by invoice or record which shows what the money has been paid for?

• Outgoing money

Are there purchase orders for all outgoing financial spend? Are the items that are listed necessary for the company to do it's job? Were these purchases followed up with a receipt to show that the purchase had been finalized and that the item has been delivered, where necessary?

• Wages

Are the wages that are paid reflective of the work that has been done? Has someone actually been to work? If someone is on a salary wage, their pay should stay the same and not fluctuate. This is also something that they will look into.

• Expenses

Are any expenses that are claimed necessary for the company e.g. Travel costs to meetings, hotels etc are usually legitimate, wine is usually not. They will look into these expenses and see if these are all actually company expenses and they all tally with proof of purchase.

An audit is an evaluation of an organization, system, process, project or product. It is performed by a competent, independent, objective, and unbiased person or persons, known as auditors. The purpose is to verify that the subject of the audit was completed or operates according to approved and accepted standards, statutes, regulations, or practices. It also evaluates controls to determine if conformance will continue, and recommends necessary changes in policies, procedures or controls. Auditing is a part of some quality control
certifications such as ISO 9000.
The main objective of an audit is to examine the books of accounts and establish their completeness,correctness and fairness,so that the auditor is in a position to certify as to whether the profit and loss account depicts a true and fair view of the net profit and the balance sheet depicts and true and fair view of the financial position of the business.
From the point of view of convenience the objectives of auditing can be divided into three categories as is clear from the following chart:
  Objectives
1. Main object obtaining   2.Subsidiary objectives   3.other objects
knowledge about the correctness,   I)Detecting errors   I) Maintaining moral
Fairness and truthfulness of the   ii)Detecting Frauds.   Pressure on employees
accounts.   Iii)Prevention of frauds   ii)Satisfying Govt.  
  And errors.   Officials.
  Iii)Legal compliance

Auditing is defined as the evaluation of a system, process, person, Organization, project or product. It is a process that is performed in order to determine the validity and the reliability of information and also the system's internal controls.

Objectives:
The main objective of Auditing is to assure that the financial statements of an organization are free from any error.

Advantages:
- The key advantage of a Auditing is that it provides assurance to the third parties that the company's statements are fair.
- The investment decision of investors are based on this report.
- Helps in detection of frauds
- Speedy processing of loans to the company
- Professional advice by the auditors
- Often helps in settlement of disputes

Limitations:
- Auditing does not provide complete surety that the financial statements are
free from material misstatement.
- The limitations of the accounting and auditing processes affect the audit as a whole.
- The accounting Measurement principles have multiple ways of accounting for any transaction, thus the auditing is affected eventually.
- The management's decision about accounting procedures affect the internal and external accounting process.
- The audit process and the technology used also limits the assurance of an audit.

Auditing may be defined as an independent and objective examination of the final accounts of a business for the purpose of determining whether the balance sheet and profit and loss accounts present fairly the financial position of the business and results of operations.
This is usually a financial statement. It may be the form of a balance sheet, a profit sheet and loss accounts, a receipts and payments account, a statement of cost etc or it may be statement of quantities of good sold.

The discovery of errors and frauds should be take place during routine checking and vouching and the auditor's action will be guided by the types of error and frauds disclosed. When a person knows that his financial transactions are to be examined by an independent auditor, it is in itself a good means of preventing frauds by the creation of fear being found out. In addition, the auditor can suggest methods of internal check which will limit the possibility of fraud by collision of two or more persons. If the proprietor of a business gets the accounts audited by an independent person, he would definitely have an independent opinion on the accounts examined by the auditors

Its main objects

Define auditing and explain its advantages?

The word audit is derived from the Latin word admire which mean to hear. In the good old days whenever the proprietors of a concern suspected a fraud, certain people were appointed to hear verbal evidence of transactions of barter and to judge the facts. They heard the points of view of those who maintained the accounts. An audit may then be said to be such an examination of the books, accounts and vouchers of business as shall enable the auditor to satisfy himself whether the balance sheet is properly drawn up, so as to give a true and fair view of the state of affairs of the business and that the profit and loss account gives a true and fair view of the profit or loss for the financial period, according to the best of his information and the explanations given to him as shown by the books.

Perhaps the best way to define the audit is to tell why it is done as the action is presumably such as to fulfill its purpose. In this context the definition of audit would differ depending upon where it is the case of concerns which voluntarily get their accounts audited on whether it is mandatory.

Auditing is not as important as it might seem to be. It is only  important and useful for stakeholders (i.e. Shareholders, bankers,  investors etc) that have an interest in public corporations.  Stakeholders require an assurance on management behaviorism  assertions that they make in financial reports. This is the primary  function of external auditors; that's is to provide a credibility to the  financial information that stakeholders need to make sound business  decisions. Stakeholders do not need any type of information, they  specifically need an error free reliable information. On the other  hand, auditing for small businesses and private corporations may not be  required at all because they don't post their shares on public stock  exchanges!!!!

The purpose of management audit is to assess the performances, review the organization structure and suggest best course of action. It is voluntary audit and an auditor can go through management functions to check the policies. The purpose of auditing is satisfying the taxation officers. The audit can be conducted to determine the income. The sole proprietors and partnership firms can settle their tax matters through tax audit. The purpose of social audit is to measure social performance of business. The society is concerned with protection of natural environment. The social audit is to examine the business performance for society.

The purpose of propriety audit is to examine the proper use of money. There is a requirement of economics use of resources in best interest of business. There must be justification of spending every rupee for the benefit of business. This audit can determine the wise use of economy. The purpose of cost audit is to verify the correctness of cost account.

The management must have followed the cost objective in maintaining the books and other records. The cost audit can help management to improve the efficiency in doing business. The purpose of operational audit is to prevent the misuse of resources.

Auditing is also known as Processing. It can be described as the application and evaluation of processes and procedures by a trained auditor. Thus it can be defined as the action of asking a question, getting an answer and acknowledging the person for that answer. Thus it is nothing but the actual verification of a procedure and its suitability.

An audit can be carried out properly and successfully only if there is a clear knowledge about the procedures carried out because only then it can be compared with the recommended procedure. To put auditing in simple terms it is the process of recording database activity and access to database objects as it occurs in the database. It is done to reduce mistakes and enhance effectiveness.

Auditing is the examination of the books of accounts and documents of a business