Skip to main content

What is Auditing --- Definition.

In very simple words auditing is the evaluation of any 'Person'. In legal terms person means; An individual , Association of Persons (AOP) and a Company. But the students of Professional accountancy like CPA, C.A and Management Accountants mostly concentrates on auditing and involved in Auditing activities like; Financial auditing, cost auditing and Internal control.
What is Auditing ? Every beginner ask from his teacher or his friend. Basically all authors define auditing in the same manner, but different professional bodies have their different modified definitions, for example one for understanding:

 International Auditing Guidelines used to define Audit as:
 " An audit is the independent examination of financial statement or related 'information of an entity', whether profit oriented or not and irrespective of its size, or legal form when such an examination is conducted with a view to express an opinion thereon".

This definition comprises on:
1.Independent Examination:- It means that auditor (The person appointed by company with the approval of shareholders to conduct audit) must be independent and he has all the written or express powers to examine any document for evaluation. Management of the company must provide him all the details for proof.
2. Financial Statement:- Basically auditor evaluate the company on the basis of financial statements; Like he check out that whether F/S are being produced in accordance with local laws ( Companies laws, Tax laws, etc.) and international laws (IFRS, IAS) etc.
3. Nature of Entity:- The audit may be of profit oriented business or not for profit entity. Profit making business like companies working in the field of ; Oil and Gas, Aviation, Telecom etc. and NPO (Not Profit Organisation) like working in the field of; Education, Sports, Charity and religious activities.
4.Opinion:- The purpose of appointment of auditor is to assure to shareholders and stakeholders (Banks, employees, Supplier, Govt...)  that company is complying with rules and regulations and their is no evidence for any fraud and misstatement in documentation. So auditor assess the audit on the basis of certain tests like by sampling or by checking some important records about assets or payments on random basis. Auditor always give his opinion, because nobody can find out clear crystal performance of business but on certain pre-determined assumption he gives his written opinion whether financial statements are giving true and fair view or not.

                                                                                                               Muhammad Asad Ishaq.
                                                                                                                           ICMA ( Finalist)
                                                           Institute of Cost and Management Accountants of Pakistan.
            

            
If you want to add your article on this blog mail quickly your article at:
                    Mr.asadishaq@yahoo.com
Labels:

Comments

Post a Comment

Thanks to all , for valuable comments

Popular posts from this blog

What is Investment?

Investment is basically the committment of funds in assets with the hope that it will generate income or appreciate in the future with anticipated risk. There are three words in the definition includes; funds, assets and income. 1. Funds mean the money someone is going to invest. 2. Assets mean any tangible property (Land, Building etc) or intangible (patent, copyright) or financial assets like shares and debentures of the company. 3. Income is the difference between Revenue (Cash inflow) and Expense (Cash outflow). The building of a factory used to produce goods and the investment one makes by running college or university are both examples of investments in the economic sense. In the financial sense investments include the purchase of bonds, stocks or real estate property.
1 comment
Read more

Internal Control in Business --- (Definition)

Every Business have objectives and goals, to achieve these goals organisation must be so designed to have proper internal control on it functions and activities. The question is what is Internal Control ? Auditing Guideline "Internal Control" issued by Institute of Chartered Accountants of England and Wales defines internal control as: "The whole system of controls, financial or otherwise, established by the management in order to carry on the business of the enterprise in an orderly and efficient manner, ensure adherence to management policies, safeguard the assets and secure the completeness and accuracy of the records. The individual components of  an internal control system are known as "Internal Controls" or "Controls" ". PIA-Internal Contol System  Explanation:-  It is the control of whole system, whether it is related to financial record or other areas like technical or legal etc. The rules and procedures of control are set by high...
Post a Comment
Read more