The word, audit, has been derived from the Latin word “Audire” meaning to hear. Auditing is a formal examination of accounting books, documents and vouchers of a business concern in order to verify the profit and loss and the financial position of a business. It’s a systematic check or assessment of financial records of a business, department or organization to establish accuracy or efficiency or effectiveness.
The need of audit arises due to the fact that a business enterprise needs to ensure the correctness of all accounts pertaining to the business. It is also important to ascertain whether or not, thefinancial statements, profit and loss account and balance sheet have been prepared in a way as to show the summary of the flow of transactions for the whole period and the true picture and position of a business enterprise. Besides, in order to ensure the accuracy or the efficiency of the records, detection and prevention of errors is vitally important. Hence, audit, under its main objectives and subsidiary objectives fulfills the purpose.
Audit is an effective tool of Management, as internal audit is conducted in order to ensure the policies are being followed. It enables to make valuable suggestions for improvement and to formulate future policies of a business. Audit also helps management to review the policies from time to time.
Audit is of great importance to gain confidence in investors of a joint stock company. Since the audited statements are very much useful, the investors can ensure whether or not they need to invest capital.
K.A.Fareed (Fareed Siddiqui)
Writer, Trainer, Author, Vba/Vb Developer
BBA; MBA-Finance; M.Phil-Financial Management; (PhD-Management)
Individual Member of Institute of Management Consultants of India
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