Basic Concepts

*Introduction

• Historically, the word ‘auditing’ has been derived from Latin word “audire” which means “to hear”.
• expression conveyed the manner in which the auditing was conducted during ancient time.
• Auditing along with other disciplines such as accounting and law, equips you with all the knowledge that is required to enter into auditing as a profession.
• The statements of account are viewed by different interests from different angles; consequently a statement prepared primarily for the use of the owners may not be wholly useful to interest of other users.
• so that such external independent Party an expert of accounting and finance, who has verified the books of accounts and certified financial statement as true and fair view known as Auditor.
• Thus an auditor may review the financial statements of an enterprise to ascertain whether they reflect a true and fair view of its state of affairs and of its working results.

*Definition of Auditing

As per the ICAI, “Auditing is defined as a systematic and independent examination of data, statements, records, operations and performances (financial or otherwise) of an enterprise for a stated purpose. In any auditing situation, the auditor perceives and recognizes the propositions before him for examination, collects evidence, evaluates the same and on this basis formulates his judgment which is communicated through his audit report.”

“An audit is independent examination of financial information of any entity, whether profit oriented or not, and irrespective of its size or legal form, when such an examination is conducted with a view to expressing an opinion thereon.”

*Standards on Auditing (SA)

• International Auditing and Assurance Standards Board: In 1977, the International Federation of Accountants (IFAC) was set up with a view to bringing harmony in the profession of accountancy on an international scale.
• the IFAC Board has established the International Auditing and Assurance Standards Board (IAASB) to develop and issue, in the public interest and under its own authority, high quality auditing standards for use around the world.
• The objective of the IAASB is to serve the public interest by setting high quality auditing standards and by facilitating the convergence of international and national standards, thereby enhancing the quality and uniformity of practice throughout the world and strengthening public confidence in the global auditing and assurance profession.
• The IAASB achieves this objective by: > Establishing high quality auditing standards and guidance for financial statement audits that are generally accepted and recognized by investors, auditors, governments, banking regulators, securities regulators and other key stakeholders across the world; > Establishing high quality standards and guidance for other types of assurance services
  on both financial and non-financial matters; > Establishing high quality standards and guidance for other related services; > Establishing high quality standards for quality control covering the scope of services
  addressed by the IAASB; and > Publishing other pronouncements on auditing and assurance matters, thereby advancing public understanding of the roles and responsibility of professional auditors and assurance service providers.