The word 'Audit' is derived from the Latin word 'Audire' which means 'to listen'. In the past , owner used to appoint auditor when he/she suspect fraud. Auditor used to listen the explanation given by persons responsible for financial transactions. At that time, auditing was conducted only to locate errors and frauds. But, after the development of double entry book-keeping system, the duty of an auditor was described at first. After that, scope of audit has been increased. After industrial revolution, scope, size and complexity of business have been increased and owner and management remain separate. So, now-a-days, auditing is the act of checking books of accounts by an independent person for the purpose of proving true and fairness of results of operation presented by income statement and financial position presented by balance sheet detecting and preventing errors and frauds. So, auditing is that act which checks whether all the personal and impersonal ledger balances are shown properly or not , accounting is maintained properly or not, whether the frauds and errors are committed in the books of accounts or not. An independent person who checks books of account is known as Auditor. Therefore, we can draw the following facts in connection to audit.
1. Checking of books of accounts and documents of evident on the basis of generally accepted principles and procedures.
2. Checking of works performed by the staffs whether they have been performed within the limitation of authority or not.
3. Checking the books of accounts whether the results presented by profit and loss account and financial position presented by balance sheet are true and fair or not.
4. Preparation of report based on the fact found during the course of audit.