Meaning of Auditing
The term ‘Audit’ is derived from the Latin word, “Audire”, which means, ‘to hear”. Auditing is a detailed and critical examination of books of accounts and support documents to verify whether the financial statements which include Profit and Loss Account and Balance Sheet represent a true and fair view of the state of affairs of the business concern.
It is the verification of financial position as it is disclosed by the Balance Sheet and the Profit and Loss Account. It is an examination of accounts to ascertain whether the Balance Sheet and the Profit and Loss Account give a true and fair view of financial position and Profit or Loss of the business. For this purpose, all the business transactions and the manner in which these are recorded must be examined.
Auditing is the intelligent and critical test of accuracy, adequacy and dependability of accounting data and accounting statements. It is concerned with examination of accounting data to determine the extent of accuracy of Profit and Loss account and the Balance sheet prepared from such data.