What is auditing?

 Introduction:

The word audit is derived from Latin word "audire" which means to listen. In ancient time the auditor have to read loudly and the head of the state use to listen. As the time pass, the word audire changed into the term audit.

What is auditing?
Auditing means the act of examining the books of accounts in order to ascertain the arithmetical, conceptual and theoretical accuracy of keeping the accounts.

Importance of Audit/Auditing:

The following are the importance of auditing;

1. It provides the accuracy of maintaining the record of transactions under double entry system of accounting.
2. It provides a basis for comparing the performance of current years with that of the previous years.
3. It detects the possible misappropriation and embezzlement of fund by the concerned staff.
4. It acts a basis of auditing the tax liability of corporate bodies.
5. The reports of auditing can be presented in the court of law in case of disputes and misunderstanding as a evidence.

Types of Audit:
There are two types of audit. They are : (1) Internal Audit and (2) External/Final Audit.

# Internal Audit: The audit conducted by the concerned auditing staff of the particular company as a routine work is called Internal Audit. 
In the government offices of Nepal , the Internal Audit is done by  the staff of District Treasury and Comptrollers office.

Objectives of Internal Audit:

1. For verification of accounts
2. For internal control.
3. For proper application of rules.
4. For removing the deficiencies.
5. For helping the final audit.
6. For managerial suggestion.

# External/Final Audit: A legal verification of bills vouchers, statements and reports by a professional auditor based on the existing law of the nation is called final/external audit. Final Audit is conducted at the end of every fiscal year.

In government office, the Final audit is carried out by the office of Auditor General  in Nepal.

Objectives of Final Audit:

1. To report about the annual profit and loss of the companies.
2. To check whether the books of accounts are maintained under the formats provided by the company act or not.
3. To locate the possible frauds and errors committed by the concerned staff.
4. To provide the necessary opinions to the concerned statute through reports.

What are the difference between Internal Audit and Final Audit?

The following are the difference between Final/External and Internal Audit.

S.No	Final/External Audit	Internal Audit
1	It is conducted at the end of the fiscal year.	It is conducted on a regular basis.
2	The audit report is presented to the government.	The audit report is presented to management.
3	The qualification of the auditor is fixed by the law.	The qualification of the auditor is fixed by the management.
4	Its main aim is to meet the requirement of the law.	Its main aim is to meet the requirement of the management.
5	Termination is through annual general meeting.	Termination is done by the management.

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