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Without question, the independent audit function plays an important role in both business and
society. Numerous third parties, including investors, creditors, and regulators, depend on the
competence and professional integrity of independent auditors.
Economic decisions are typically based upon the information available to the decision maker. To
obtain the most benefit, users should have economic information that is both relevant and
reliable.
This need for relevant and reliable financial information creates a demand for accounting and
auditing service.
DEFINITION AND BASIC FEATURES OF AUDITING
Auditing is the accumulation and evaluation of evidence about information to determine and
report on the degree of correspondence between the information and established criteria.
Auditing should be done by a competent and independent person.
Auditing enable the auditor to express opinion whether the financial statements are prepared, in
all material respects, in accordance with an identified financial reporting framework. This
framework (criterion) might be generally accepted accounting principles (GAAP), or the national
standard of a particular country.
Financial statements include balance sheet, income statement, statement of cash flow, notes and
explanatory material that are identified as being part of financial statements.
The phrases used to express the auditors opinion are that the financial statements give a trued
and fair view or present fairly in all material respective.
Note that the auditor does not certify the financial statements or guarantee that the financial
statements are correct, he reports that in his opinion they give a true and fair view, or present
fairly the financial position.
ACCOUNTING VS AUDITING
(2)
(3)
Compliance audits.
1.
statements have been prepared in conformity with generally accepted accounting principles.
2.
organization for the purpose of measuring its performance. The operation of a unit can be
evaluated for its effectiveness and efficiency.
3.
1.
Independent auditors,
2.
Internal auditors,
3.
Government auditors.