Definition and Explanation of Auditing

There are various definitions for Auditing.  We will present some of them.  Students are encouraged to go through all and choose those appealing to them.

Audit is an independent examination of financial statements of an entity that enables an auditor to express an opinion whether the financial statements are prepared (in all material respects) in accordance with an identified and acceptable financial reporting framework (e.g. international or local accounting standards and national legislations).

An Audit is one in which a practitioner expresses a conclusion designed to enhance the degree of confidence of the intended user other than the responsible party about the outcome of the evaluation or measurement of a subject matter against criteria.

Auditing is 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 their truth and fairness.

In simple terms an audit is offering an opinion about specific information so that the users of that information are able to make confident decisions.

Auditing can also be defined as the process whereby a knowledgeable third party examine and evaluate the work of a steward against acceptable standard and expresses opinion.

A steward here means someone or a party employed to manage another party’s property.

Let us spend some time to identify the unique features of auditing.

1.       Independent Examination – this means the party conducting the audit had not performed or had not been involved in any away in the work being evaluated.  This also means the auditor should not audit the work of party who can influence him/her. The auditor must be seen to be independent.

2.       Qualified party – this means the party conducting the audit should have the appropriate knowledge, skills, experience and integrity.  In many cases the party should be certified and a member of recognized group.

3.       Record and financial statements – examination and evaluation of detail information/data relating to the subject matter. Normally include source documents, approval for transactions, books of original entry, balances and classes of balances.

4.       Opinion – the auditor after using his skills, knowledge, experience and professional judgement to evaluate/examine evidence expresses his view point on subject matter.

5.       True and fair – this means the subject matter to a large extent is free from deviation either intentionally or unintentionally.

6.       True – the subject matter underlying information is factual and conforms to reality and not fabrication.  The subject matter conforms to acceptable standards.

7.       Fair – the party responsible for the subject matter did not apply pick and choose in performing his duty but complied with acceptable practices.




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