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Auditing-Meaning-Definition-Objectives

Introduction to Auditing

Meaning and Definition of Auditing

The word Audit is derived from Latin word “Audire” which means ‘to hear’. Auditing is the intelligent and critical test of accuracy, adequacy and dependability of accounting data and accounting statements. Different authors have defined auditing differently, some of the definition are:


“Auditing is an examination of accounting records undertaken with a view to establishment whether they correctly and completely reflect the transactions to which they purport to relate.”-L.R.Dicksee


“Auditing is concerned with the verification of accounting data determining the accuracy and reliability of accounting statements and reports.” - R.K. Mautz


“Auditing is the systematic examination of financial statements, records and related

operations to determine adherence to generally accepted accounting principles, management policies and stated requirement.” -R.E.Schlosser

Objectives of Auditing

The objectives of auditing are changing with the advancement of business techniques. Earlier it

was only to check the correctness of receipts and payments. The objectives of the auditing have been classified under two heads:

1) Main objective

2) Subsidiary objectives

Main Objective: The main objective of the auditing is to find reliability of financial position

and profit and loss statements. The objective is to ensure that the accounts reveal a true and fair view of the business and its transactions. The objective is to verify and establish that at a given date the balance sheet presents a true and fair view of the financial position of the business and the profit and loss account gives the true and fair view of profit or loss for the accounting period. It is to be established that accounting statements satisfy a certain degree of reliability. Thus the main objective of auditing is to form an independent judgement and opinion about the reliability of accounts and truth and fairness of financial state of affairs and working results.

Subsidiary objectives: The subsidiary objectives of the auditing are:

1. Detection and prevention of fraud: the one of the important subsidiary objective of

auditing is the detection and prevention of fraud. Fraud refers to intentional

misrepresentation of financial information. Fraud may involve:

  • a. Manipulation, falsification or alteration of records or documents

  • b. Misappropriation of assets.

  • c. Suppression of effect of transactions from records or documents.

  • d. Recording of transactions without substance.

  • e. Misapplication of accounting policies


2. Detection and prevention of errors: is another important objective of auditing. Auditing

ensures that there is no mis-statement in the financial statements. Errors can be detected

through checking and vouching thoroughly books of accounts, ledger accounts, vouchers

and other relevant information.
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