Auditing and its Objectives
Originally audit means to hear. The term audit is
derived from Latin word ‘audire' which means to hear. In the primitive stages
of audit and expert persons or persons with high calibers are entrusted with
hearing the accounts from accountants and express their opinion on correctness
of accounts. The prime object of audit was to ensure the correct accounting of
cash receipts and payments there by ensure that no cash has been embezzled.
The Modern concept of auditing has drastically changed, now auditor is expected to act as a friend, philosopher in attaining higher order of excellence in accounting and there by meeting the expectation of all stockholders in organisation.
According to Picer and Pegler Audit as ‘such an examination
of the books accounts and vouchers of business as will enable the auditor to
satisfy himself 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 and loss account gives a true fair view of the profit or loss the
financial period, according to the best of his information and the explanation given
to him and as is shown by the books, and if not, in what respect he not
satisfied.
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| OBJECTIVES OF AUDITING |
OBJECTIVES OF AUDITING
The statements on Standard Auditing Practices: Objective and Scope of Audit of financial statement" (SAP2) of the Institute of Chartered Accountants of India specifies that the objectives of an audit is to express an opinion on the financial statements. To give the opinion about the financial statements, the auditor examines the financial statements to satisfy himself about truth and fairness of financial position and operating results of the enterprise. There are certain inherent limitations of audit examination.
It would not be possible for auditor to discover all errors
and frauds, in the financial statements due to the limitations of his checking.
The SAP2 of the Institute of Chartered Accountant of India, states that 'such
discovery is not the main objective of audit." In the light of the above
statement the objectives of an audit has been divided into two.
The primary objective and the secondary objective.
The primary objective of auditing is:
- To express his opinion on the financial statement that they reflect a true and fair position of business.
- The financial statements, trading, profit and loss account and balance sheets have been drawn up accordingly and they reflect true and fair position of business affairs.
- Ensure that the books of accounts have been maintained properly and they summarize a true and correct summary of business transactions.
The secondary objectives of auditing are to:
- Detection and Prevention of Errors and
- Detection and prevention of frauds.
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