Definition of Auditing
        It is not easy to define the word "audit"  precisely. The word audit is derived from Latin word audire  which means 'to hear '. In the olden days ,a person was appointed to audit Cash transactions only i.e. whether the person responsible for recording Cash receipts and payments on the behalf of business owner has done his job properly or not. Hence it was merely a Cash audit. But now the word audit has wider meaning.
         Auditing is the verification of financial position as disclosed by the Balance Sheet and the Profit and Loss account. It is an examination of accounts to ascertain whether the balance sheet and profit and loss accounts give a true and fair view of financial position and profit or loss of the business. For this purpose, all the business transactions and the manner in which these are recorded must be examined.
         Auditing is the intelligent and critical test of accuracy and dependability of accounting data and accounting statements.
    "Auditing is a systematic and independent examination of data ,statements, records, operations and performances of an enterprise for a stated purpose. In any auditing situation, the auditor perceives and recognizes the propositions before him for examination, collects evidence, evaluates the same and on this basis, formulates his judgement which is communicated through his audit report."
      Auditing involves the following steps:
(i) A study of organisation and its structure.
(ii) Analysis and review of systems of accounting and internal control.
(iii)Testing arithmetical accuracy of records and collection evaluation in support of transactions.
(iv) Verification of state of affairs disclosed by the balance sheet and profit or loss disclosed by profit and loss account.
(v) Preparation of report, expressing opinion whether accounts present a true and fair view.
   Functions of Auditing
Important functions of auditing can be summed up as follows:
1.Reviewing systems and procedures of business.
2.Examining documentary evidence to establish the accuracy of recorded transactions.
3.Reviewing the system of accounting and internal control.
4.To verify the valuation and existence of assets.
5.To examine the mathematical accuracy of accounting statements.
6.To see whether the statutory requirements have been complied with.
7.Reporting as to what extent, accounts exhibit truth and fairness.
8.To make recommendations for improvement in internal control and accounting system.
9.To verify the distinction between capital and revenue items.
 Bookkeeping, Accountancy, Auditing and Investigation
             In earlier days Bookkeeping, Accountancy and Auditing were considered as the three aspects of the term accountancy. This was the time when there was no demarcation between the duties of the bookkeeper and the accountant. But with the increase in trade ,commerce and industrial activities, bookkeeping and accountancy have become separate functions.
The following steps explain the distinction:
(a) Bookkeeping.    (i) Journalizing
                                  (ii) Posting to the ledger
                                  (iii)Totalling various accounts in                                         the ledger
                                  (iv)Balancing of ledger accounts
(b)Accountancy.     (v) Rectification of errors
                                  (vi)Preparing the trail balance
                                  (vii) Preparing Trading, Profit                                                  and Loss Account
                                  (viii)Preparing Balance Sheet
(c)Auditing.             (ix) Checking and verification of                                            work done by Accountant.
Bookkeeping
     Bookkeeping is the art of recording day-to-day transactions systematically in the books of accounts. This part of work is performed by the bookkeeper. His job includes journalizing, posting, totalling and balancing of ledger accounts. Whole of the work of bookkeeper is mechanical involving use of principles of double entry system. A person with simple knowledge of double entry system can perform this job.
Accountancy
         Work of accountancy starts where bookkeeping ends. It is wrong to say "Accountancy begins where Bookkeeping ends." The job of accountant starts when bookkeeper has finished his job. The accountant has to satisfy himself that the transactions have been recorded and posted to the ledger properly. The work of accountant is to check arithmetical accuracy of accounts prepared by bookkeeper by preparing trial balance. If any error or omission arises it shall be rectified.Finally accountant is to prepare Trading profit and loss account and the Balance sheet, incorporating necessary adjustments there in. It may be summed up that accountancy involves the following steps:

Auditing
  "Auditing begins, where accountancy ends." After the accountant has completed his work an auditor is invited to verify the work done by accountant. It is not the duty of auditor to prepare the accounts. He is concerned with critical examination and verification of accounts prepared by others. Auditor is an independent person appointed specifically for the purpose of certification of work done by others. Auditing presupposes the existence of completed financial statements prepared by the accountant. After completing his work, auditor has to submit a report of the fact whether or not profit and loss account and balance sheet exhibit true and fair position of the business.
     An auditor must be a competent person, well versed in various accounting system and principles. As per the provisions of Companies Act,he must be qualified Chartered accountant. Audit report must be prepared only after the auditor has checked and verified thoroughly various accounting records.
    An accountant cannot perform the function of an auditor. He cannot certify the financial statements as correct and present