Audit is the science to check all the accounts, financial statements, records or a company or a business or any not for profit organisation without any interfere by accountant or interested parties of same company or same business or same organisation.
Its main aim is to check whether all the books of accounts, bills, documents are showing true and fair views or not. Whether as per law, it is maintained and follow the previsions of same law. There are lots of laws like company law, partnership law, contract law, tax law and GST.
A person who audits the accounts is called auditor. Generally auditor is professional CA for independent audit of company. After completing the audit, he or she prepare audit report. If all the accounting reports are audited by auditor, it is the guarantee to shareholders that accounting reports like balance sheet, income statement and cash flow statements are true and show real financial and performance situation of company. Without audit, accounting reports may be misstatement or window dressing or full of accounting mistakes or not full disclosure of financial information to public.
For example, a company was working in 1990. Its accountant had made the balance sheet as per desire of its board of directors and showed faked assets in its asset side for showing strong position of company. When its account was audited by independent auditor, it found that there was no existence of such assets. Millions of dollars of shareholders money saved from this audit. Otherwise whole money was wasted by fraud company. So, audit is so important.
Audit is done on the basis of evidence, evaluation and opinion and judgment of auditor. Audit helps shareholders to take better investment decisions.
