Need and origin of auditing
Origin: The
origin of auditing may be traced to Middle Ages but the audit in its present
form and concept can be traced after the introduction of large-scale production
as a result of industrial revolution during the 18th century.
Stabilised governments, expansion of banking facilities and introduction of
limited companies, improved means of communication are all responsible for the
origin of auditing.
Need: The
expansion of business activities, more and more involvement of owners in
controlling business, increase in responsibilities of the lords and manners in
government matters, delegation of funds by investors and others, management of
business by directors, managers etc, made the direct control and supervision
loose and less effective. The administrators of businesses and government funds
became the sole authority. So it was found necessary to put some kind of check
and moral pressure on their free-hand working; lavish expanding and
misappropriations. The introduction of government levies and tax, their recovery
and spending also increased the importance of some sort of check. Hence the
need for auditing.
The need of
auditing may well be expressed by saying that auditing is a careful searching
of the books of accounts by comparing them with the documents and papers from
which they have been written up and thus trying to find out whether the profit
or loss for a particular period and the financial position as shown by the
balance sheet are correct and true and fair.
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