Auditing Introduction

The concept of auditing has been derived from Italy. In the late 14th century, Luca Pacioli introduced the duties and responsibilities of auditors to the world. He introduced the double-entry system of keeping the records in reports.

In India, auditing has a different definition, some of them are:

  • Auditing is an intelligent way of keeping books of accounts of a business with the documents from which they were written and ensuring whether the profit and loss amount as reflected in the balance sheet are determined fairly and truly.
  • Auditing is a detailed examination of the financial reports of an organization Or, Auditing can be defined as the accumulation and evaluation of pieces of evidence to determine the conformity between the financial statements and the authorized criteria.

In India, the auditor can only be appointed by a special resolution according to section 224 also known as the companies amendment Act, 1974. The cost audit is conducted by members of the Institute of Cost and Works Accountant of India according to section 233-B of the Companies Act, 1956.

In India, the Government Diploma in Accountancy (GDA) was the first course related to auditing introduced by the government of Bombay in 1913. The Chartered Accountant Act was established in 1939 in India after passing of the Auditors Certificate Rule in 1932. According to the Chartered Accountant Act, the person was authorized to become an auditor only when he qualifies the examination conducted by the Institute of Chartered Accountants of India.

Auditing is the advance of accounting, it begins where accountancy ends. Auditing is not for the purpose of preparation of records but for checking and verification of accounts or records maintained.


Its main objective is to ensure the financial reliability of any organization. The other objectives are Independent opinion and judgment. Auditing provides confidence for all stakeholders about the accuracy of the organization’s account reports. The accounts of all the public firms must be audited by an independent auditor before declaring the results each quarter.


Techniques of Auditing:

The common techniques of performing auditing −

  • Visible verification of assets.
  • Verification and analysis of transactions with available pieces of evidence.
  • Inspection of the books of accounts,
  • Checking of past profit and losses.

Scope of Auditing:

In the earlier days, the main objective of auditing was to detect fraud and errors but now auditing is used to verify true financial statements. Nowadays, almost every country of the world has introduced rules and regulations of auditing.

The main objective of auditing is to guarantee the clarity of financial statements and to expose errors and frauds.

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