Auditing is defined as a process, carried out by an appointed qualified person or body, whereby the records and financial statements of an entity are subjected to independent examination in such detail as will enable the auditor form an opinion as to the truth and fairness of the financial statements.
Reason for Auditing:
The managers of the business (directors) are obliged to report to the owners (shareholders) on how their business has been managed.
Purpose of Auditing:
The primary purpose of an audit of financial statements is to enable the auditor to express an opinion whether the financial statements are prepared, in all material respects, in accordance with an identified financial reporting framework and that the financial statements give “a true and fair view” or “present fairly, in all material respects” the financial results and state of affairs of the client entity.
The subsidiary objectives are:
• To detect errors and fraud.
• To prevent errors and fraud.
• To help the client to improve upon his accounting and internal control systems.