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Lecture notes Accounting
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Definition of audit object of audit
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The word "Audit" has been taken from Latin word "Audire" which means "to listen" or "to hear".In old days, audits were done by listening arguments of the parties, who maintained the books
of accounts. With the passage of time audit became necessary at the end of accounting cycle
and declared a statutory requirement in case of Public Limited Companies. Proper rules and
regulations were framed up where by subject of auditing came into existence.
DICTIONARY MEANING:
The word audit means,
"An examination of the accounting record"
L.R. DICKSEE SAYS (1951):
"An examination of accounting records undertaken with a view to establish whether they
completely and correctly reflect the transactions to which they
purport to relate."
SPICER & PEGLAR (1963):
“Audit is an examination of business records by which the auditor is satisfied that the Profit and
Loss account and the Balance sheet of a business are prepared according to the legal
provisions and they are presenting a true and fair view of the business position".
AMERICAN INSTITUTE OF ACCOUNTANT:
A special committee of the American Institute of Accountant has defined it in the Following
words:
"An examination intended to serve as a basis for an expression of opinion, regarding conformity
with accepted accounting principles, of statements prepared by a corporation or other entity for
publication."
EXPLANATION:
We find following key elements of the above definitions:
1:Checking of accounting records
2:Comparing accounting records and financial statements, with evidences, provided ensuring
validity of records by an independent opinion.
OBJECTIVES OF AN AUDIT
1. Primary objectives
2. Secondary objectives
3. Implied objectives
(A)PRIMARY OBJECTIVES
REPORTING:
The auditors are required to be appointed under the following provisions of Companies
Ordinance 1984 for submitting the report about the accuracy of business accounts at different
stages:
It requires an audit report to be & receipts and payments statement.
b) PROSPECTUS REPORT:
SECTION 53 (1):
It requires an audit report to be included in the prospectus of the company abo
performance of the company in the past five years.
c) ANNUAL REPORT:
SECTION 255 (3):
It requires a report of fairness about the profit & loss Account and the Balance she
the latest year to be presented at the Annual General Meeting (AGM).
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