Audit definitions for B.commers

1. Composed by: Basharat Ali
Auditing
By R.K. Mautz
“Auditing is concerned with the verification of accounting data with determing the accuracy and reliability of accounting
statements and records.”
By A.C.C.A.:
“Audit is an exercise that auditors carry out in order to be able to give a legal opinion whether financial statements give
true and fair view.”
Simple Definition
“Auditing is an independent examination of financial information of an enterprise whether profit oriented or not
irrespective of its legal from and size, when such examination is conducted with a view to expressing an opinion.”
Auditing:
“Auditing is an independent examination of financial information of an enterprise whether profit oriented or not
irrespective of its legal from and size, when such examination is conducted with a view to expressing an opinion.”
Accounting:
“It is a systematic process of identifying, recording, measuring, classifying, verifying, summarizing, interpreting and
communicating financial information.”
Continuous Audit
By R.G. Williams:
“Continuous audit is one where the auditor or his staff is constantly engaged in checking the accounts during the whole
period or where the auditor or his staff attends client’s office at regular or irregular intervals during the period.”
By L.R. Howard:
“Continuous audit work is conducted throughout the course of the financial year but is not taken to a specific accounting
period as in interim audit.”
By L.R. Dicksee:
“An audit which is fully continuous involves the attendance of the auditor’s staff at the client’s office throughout th e
period under review.”
Interim Audit
By R.G. Williams:
“An interim audit is one when the auditor completes an audit up to date of a set of interim accounts, for example
quarterly or half yearly accounts.”
By L.R. Howard:

2. “Interim audit is conducted to a particular date within the accounting period.”
Composed by: Basharat Ali
Final Audit
By L.R. Howard:
“Final audit is carried through to completion in one continuous session”.
W.W. Bigg:
“A final audit is an audit which is not commenced until after the end of the financial period and is then carried on until
completed.”
By R.G. Williams:
“A final audit is one which is not commenced until after the books have been closed at the end of the financial year and
carried through to completion after the end of the year.”
Audit Programme
According to United states General Accounting Office:
“A document listing the suggested steps and procedures to be followed in considering the audit and preparing the
report is called audit programme.”
According to Holmes:
“An audit program is a flexible planned procedure of examination of accounting records.”
According to Prof. Meigs:
“An audit program is a detailed plan of audit work to be performed specifying the procedure to be followed in
verification of each item and financial statements, giving the estimated time required”.
Internal Control
According to Spicer and Pegler:
“Internal control is best regarded as the whole system of control financial and otherwise established by the
management in the conduct of a business including internal check and internal audit and other forms of control.”
Simple definition:
“Internal control means all the policies, procedures, methods, and measures etc., adopted by the management to
ensure that everything is working in the organization as it should.”
Vouching
According to R.K. Mautz:
“The documentary evidence in support of entries is often referred to as vouching.”
According to B.N. Tandon:

3. “Vouching means testing the truth of items appearing in the books of original entry.”
According to L.R. Dicksee:
“Vouching is an act of comparing entries in the books of accounts with documentary evidence in support thereof.”
Composed by: Basharat Ali
Verification
According to A.W. Holmes:
“Verification is the proof of accuracy of extension, footings, posting, existence and ownership of assets.”
According to J. Lancaster:
“Verification of assets is a process by which the auditors examine the accuracy of the assets appearing in the balance
sheet.”
According to Spicer and Pegler:
“Verification of assets involves an inquiry into the value, ownership and title, existence and possession and the presence
of any charge on the assets.”
Investigation
According to Spicer and Pegler:
“The term investigation implies (involves) an examination of accounting records for some special purpose.”
According to L.R. Dicksee:
“An investigation is an examination of accounting records undertaken for a special purpose.”
Simple Definition:
“Investigation is an examination of any inquiry into the accounts of a business with a view to disclosing the true position
of its affairs in relation to the special matter”.
Auditor
According to C.D. Paula:
“The auditor is the individual or firm carrying on the audit of the enterprise and the partners of such individual or in such
firm.”
According to F.A. Martin:
“An auditor is a person appointed to examine the books of account and the accounts of a registered company to report
upon them to the company members.”
According to ISA:
“Auditor means the person with final responsibility for the audit. Audit firm means e ither the partners of a firm
providing audit services or a sole practitioner providing audit services, as appropriate.”

4. Composed by: Basharat Ali
Audit Report
Statutory Report:
According to L.R. Howard:
“The report which is submitted by the directors in statutory meeting of the shareholders is known as statutory report.”
Simple Definition:
“Statutory report is a report prepared by company’s secretary regarding shares allotted, receipts and payments of cash,
preliminary expenses etc. signed by at least three directors to be submitted to the members of the company for
discussion in the statutory meeting”.
Annual Report:
According to L.R. Howard
“The report which is submitted by the directors in annual meeting of the shareholders is known as annual report.”
According to Sec. 157 of Companies Ordinance 1984
“A report, which is prepared by auditor and forwarded by board of directors to members of company at least twenty
one days before the date of annual meeting is called annual report.”
Simple Definition:
“The report which is submitted by the auditors after the whole audit work for whole business duration is called “Annual
Report”.
Unqualified Report:
“The report in which the auditor gives his opinion that he is fully satisfied with the books of account and there is no
objectionable point in them is called unqualified report”.
OR
“An audit report that contains no objections and reservations is called unqualified report”.
Qualified Report:
“A report containing objections, material discrepancies, qualifications or exceptions regarding financi al position of
business”.
“An audit report which contains objections and reservations is called unqualified or clean report”.
Prospectus Report:
“Where a company offers its unissued capital to the public for subscription, the prospectus issued by the company, shall
contain a report from the auditor called prospectus report”.
Specialized Audit

5. News Company:
“An organization that provides news coverage to subscribers, as to newspapers or periodicals.”
Sugar Mill:
“A sugar refinery or sugar mill is a factory which refines sugar from various organic sources like sugarcane or beets into a
form that can be used for various cooking needs.”
Insurance:
According to Barry L. Reece
“An insurance is a contract in which on party (insurance company) agrees to pay a speci fied sum to another if a certain
event occurs.”
Insurance company:
“A company that offers insurance policies to the public, either by selling directly to an individual or through another
source such as an employee’s benefit plan. An insurance company is u sually comprised of multiple insurance agents.”
Textile Industry:
“The textile industry is a term used for industries primarily concerned with the design or manufacture of clothing as well
as the distribution of textiles.”
Bank:
According to Crowther:
“Bank is a dealer in debts of its own and other people. It accepts deposits of people and lends to the needy.”
According to J.W. Gilbert:
“A banker is a dealer in capital or more properly a dealer in money. He is an intermediate party between the lender and
the borrower.”
Steps in commencing an audit:
“The process through which the auditor defines the purpose of audit and makes strategies and develops plans to
achieve those objectives”.
Composed by: Basharat Ali
Liabilities of Auditor’s
Liability for Misfeasance
Meanings:
“Misfeasance is a legal act performed wrongfully”.
According to Black’s Law Dictionary Defines Criminal Proceedings as:
“The improper performance of some act which a person may lawfully do”.

6. Liability for Negligence:
“Negligence means carelessness or breach of duty. It is an act of omission or commission on the part of an auditor. He
may omit to do certain work under the terms of contract. He may perform his work without reasonable care.”
Criminal liability:
“The auditor is liable for criminally for following the provisions of Companies Ordinance 1984 and other laws”.
Liability for third party:
“Third parties mean those persons or concerns which have no direct dealing with the auditor but have to rely upon the
statement signed by the auditor.”
Composed by: Basharat Ali
Internal audit:
According to W.B. Meigs:
“Internal auditing consists of a continuous critical review of financial and operating achievements by a staff of auditors,
functioning as full time salaried employees.”
Simple definition:
“Internal audit is the continuous and systematic process of examining and reporting on the administrative systems and
accounting methods of a concern by its own full time salaried persons.”
External audit:
“An audit which is conducted by an independent qualified auditor with a purpose to know the trueness and fairness of
the accounts and financial statement is called external audit.”
Internal Auditor:
“An authorized person appointed by the management to check the internal affairs of the organization, not mandatory by
law”.
External Auditor:
“An independent person who carries out the work of audit to give his legal opinion on financial statements, appointed
by the board of directors, shareholders or SECP under Companies Ordinance Sec. 252 is known as external auditor”.
Auditor
According to Sec. 2 of Charted Accountants of Pakistan:
“Chartered Accountant means a person who is a member of the Institute of Charted Accountant of Pakistan and fulfills
all the necessary requirement of ICAP.”