W.B.C.S. Examination Notes On – Commerce And Accountancy – Company Audit.
Audit may be defined as ‘an official inspection of an individual’s or organization’s accounts, typically by an independent body’. A precise definition of the term ‘Auditing’ is difficult to give.Continue Reading W.B.C.S. Examination Notes On – Commerce And Accountancy – Company Audit.
Some of the definitions given by different authors are as follows:
According to Montgomery, a well known author, “auditing is a systematic examination of the books and records of a business or the organization in order to ascertain or verify and to report upon the facts regarding the financial operation and the result thereof”. “Spicer and Pegler expanded the above definition as follows:
“An audit may be said to be such an examination of the books, accounts and vouchers of a business as well enable the auditor to satisfy that 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 whether the Profit or Loss for the financial period according to the best of his information and the explanations given to him and as shown by the books, and if not, in what
respect he is not satisfied.”
Audit implies the examination of books of accounts and related documents of an organisation in order to correctly estimate their accuracy, completeness and regularity. Such an examination is carried out by a competent and unbiased person with the help of evidences, documents, information and explanations given to him. For example, if a person goes to a doctor to have himself examined, the doctor, only after a thorough examination of his body, gives his report as to whether he is healthy or not, and if not, what is the ailment he is suffering from. In the same manner, a businessman gets his books of accounts examined by a doctor of books of accounts (i.e.the auditor) who, after a thorough examination of the books, gives his report as to whether or not they give a true and fair view of the state of affairs of the deficiencies and faults in them.
Origin and Development of Auditing
The English word ‘Audit’ is derived from the Latin word ‘Auditor’, which literally means ‘to hear’. In ancient Greece and Rome, accountants used to be appointed in order to maintain the records of the government treasuries. These accountants used to go to prominent judges to get their accounts certified and used to recite their accounts in front of those judges. These judges, upon hearing the accounts, used to give their decisions as to whether the accounts were authentic or not. In ancient times auditing was merely concerned with listening.
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