MEANING OF AUDITING

Auditing means examining the authenticity of verifying the transactions with

reference to vouchers, invoice, documents, bills and cash memos. Now a
thorough scrutiny of the books of accounts and its ultimate aim is to verify
the financial position disclosed by balance sheet and profit and loss of a firm.

DEFENITION
Taylor and Perry : An audit is an investigation into the evidence from which
the financial Revenue Accounts and Balance sheet or other statements of an
organization have been prepared, in order to ascertain that they present
under review and financial statement of an organization at the end of that
date so enabling the auditor to report thereon.
 OBJECTIVES

 To examine the truthfulness of the account.

 To detect the error of omission.
 To detect the error of pasting.
 To detect compensatory error.
 To detect error of principle which does not affect the agreement of trial balance.
 To detect the fraud.
 To detect misappropriation goods.
 To detect manipulation of account.
 IMPORTANCE

 It help in detecting error and frauds.

 It increases the trust of shareholder.
 Helpful at the time of amalgamation or merges.
 Proof in court of law.
 Confidence among partners and public.
 Advantage at the time of retiring of patner.
 Faith on company at the time of declaring the dividend.
 Advantage to nation and government.
 LIMITATIONS OF AUDITING

 The auditing cannot show signal about inefficiency of management and business
ethics and finance.
 The auditing may not reveal such manipulations.
 The valuation of stocks in trade goods in progress and finished goods is not
possible to fix market rate.
 Due to lack of time, it is not possible to check all the accounts and auditor
adopts a method of test checking.
 The personal judgement of auditor is sometimes, faulty. Therefore, the audited
accounts may not exhibit a correct position.
 If the auditor is not equipped with and has not mastered in modern changes, in
accounting procedure, auditing becomes a complicated affair.
 If the auditor is not bold and independent, the purpose of Audit will never be
fulfilled.