Nature of Auditing

The nature of auditing can be summarised through the following characteristics:

1. It is an examination, not a preparation, of accounts. The auditor examines accounts already prepared by the business (typically by an accountant); the auditor does not write up the books.
2. It is based on evidence. An auditor forms an opinion by examining vouchers, invoices, bank statements, and other supporting evidence — not by taking management's word alone.
3. It involves both compliance and substantive checking. The auditor checks that internal procedures were followed (compliance) and independently verifies the figures themselves (substantive testing).
4. It results in an expert opinion, not a guarantee. An audit report expresses a professional opinion on "true and fair view"; it is not an absolute guarantee against every possible error or fraud.
5. It is a specialised, skilled service, generally performed by a person with recognised professional qualifications (see Section g below).
6. It is periodic in the usual case (commonly annual, tied to the financial year), though other types (continuous, interim) exist, as this syllabus covers later (Unit 5, Different Types of Audits). …