Auditing
Introduction to Auditing:
“Auditing is an important
professional task carrying heavy responsibility and calling for commensurate
skill and judgment”.
Confidence! Confidence!! Confidence!!! ,.
Where is confidence? What is
confidence? How it appears? Was it there any time? The answer to all these
questions is YES. It was there
before human civilization.
But, gradually as the human
civilization started growing, proportionately the degree of confidence started declining;
now it is almost disappearing. So, today we talk that, confidence building is
the need of hour.
During subsisting life when there
was no trade, even during early period of human civilization when there was
slow growth of trade and commerce there was no need of auditing.
It is the period when partnership
firm started; company form of business came into existence, the ownership and
the management was separated from one another, the question of ensuing proper
use of owner’s capital gave scope for checking and confirming the proper
application of share capital.
Today auditing is a specialized
function having complex legal, ethical and economic implications. The auditors,
as independent professionals, lend credibility to the financial statements of
organizations in which millions of people have stake either individually or
through the state.
The auditor, therefore, has come to
enjoy a distinctive professional status in society. This blog attempts to discuss the basic concepts.
Origin of Audit:
Origin of the concept of audit can
be traced to historical records of Greek and Roman empires. Checking of
receipts and payments was found with Greek empires. In the ancient times audit
was confined to only public accounts.
In the
ancient times when trade and commerce was carried by proprietors, there was no
need of checking the work of proprietors themselves. The advent of trade
commerce and industry and resulted in introduction of ownership and management
necessitated the introduction of the concept of audit. The experts in accounting
were asked to hear the accounting records and to express their opinion on the
correctness of accounting.
WHAT IS AUDITING?
The practice of hearing the accounting and expressing their
opinion is known as auditing.
WHO ARE AUDITORS?
The persons who were asked to
express their expert opinion on accounts of business were called as auditors.
In the initial stages the concept of audit was confined to
cash audit. The auditors were asked to examine and report on correct accounting
of business.
Professional audit emerged along
with advent of Industrial Revolution in 18th century. British
Companies Act 1862 recognized the professional audit for first time.
Detection of errors and frauds was the primary object of auditing.
The Institute of Chartered
Accountants of England and Wales was incorporated under the Royal Charter on 11th May 1880 with the object of developing professional auditors.
In the year 1900 USA introduced the
professional auditing with primary object of detection of errors and frauds.
At the later stage the primary
object of detecting errors was shifted to the second place and primary place of
importance was given to ascertain the correctness of the financial conditions of
business.
The concept of audit in the modern
profession has changed from original object of detecting errors to the
philosophy of confirming the authenticity, reliability and acceptability of accounting
and reporting system of the business performance.
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