The document discusses the nature and purpose of auditing. It defines auditing as the verification of accounting and financial records to determine accuracy and reliability. The primary objective of an audit is to express an expert opinion on whether the financial statements present a true and fair view. Secondary objectives are to detect and prevent errors and fraud. Specific objectives include verifying accounts and records and reporting on the profit/loss and financial position. The document also differentiates between auditing and accounting in terms of scope, objective, status, qualifications, time period of work, tenure, and accountability.

1. Assigned by:
The Nature and Purpose of
Auditing
SIR ATTA HUSSAIN
Presented by:
KASHIF LAGHARI

2. Origin of Word “Audit”
 The word ‘audit’ is derived from the Latin word
“audire” which means to hear.
 In the good old days whenever the proprietors of a
concern suspected a fraud, certain people were
appointed to hear verbal evidence of transactions
of barter etc., and to judge the facts. They ‘heard’
the points of view of those who maintained the
accounts.

3. Definition of “Audit”
 Auditing Means, the verification of accounting and
financial records with a view to determine accuracy
and reliability

4.  Objective of An Audit
 Primary/Main Objective
 Expression of Expert Opinion
 Secondary Objective
 Detection and prevention of
 Errors
 Fraud
 Specific
Objective of Audit

5. Primary or Main Objective
 The main objective of auditing is to verify the
accounts and records and to report to the owners
of the business
 whether the profit and loss account and the
Balance sheet have been properly drawn up
according to the requirements of law,
 and whether they exhibit a true and fair view of the
profit and the financial position of the business

6. Secondary Objective
Detection of and
Prevention of Errors
Clerical Errors Errors of
Principle
Error of
Omission
Error of
Commission
Error of
Compensating
Error of
Duplication

7. Detection of and
Prevention of Frauds
Misappropriation
of Cash
Misappropriation
of Goods
Manipulation of
Accounts
Secondary Objective

8. Difference Between Auditing and
Accounting
Points of difference Accountancy Auditing
1. Scope
The scope of accountancy is
limited to the preparation of
financial statements.
In, auditing, the auditor is
concerned with the
checking of accounts.
2. Objective
The objective of accountancy
is to know the financial result
and the financial position.
The objective of auditing is
to verify the truth and
fairness of the accounts.
3.Status
An accountant is the employee
of an organization.
An auditor is an
independent outsider.
4.Qualificaiton
Accounting work requires no
formal qualification.
To be the company auditor,
one should be the
qualified chartered
accountant.

9. Difference Between Auditing and
Accounting
Points of difference Accountancy Auditing
5. Time period of
work
Accounting work is carried
out throughout the year.
Auditing is usually carried
out at the end of year.
6. Tenure of
Service
Accountant is permanent
employee of the
organization.
Auditor can be changed
from year to year.
7. Accountability
The accountant is accountable
to the management.
The auditor is accountable to
the shareholders.