hello dear students welcome to device commerce and management academy so today i'm starting a new subject auditing it is my favorite subject i'm very happy to start this subject i taught many years once upon a time when i used to work in pragati mahavidyala degree college it's in koti hyderabad so i taught four sections auditing subject only continuous four sections four classes and i used to give important questions hardly 12 to 15 that's it most of the students they used to get a lot of benefit there was no failures in auditing my favorite subject now anyway in the present scenario and i'm not doing any kind of editing also because of my tight schedule no editing directly recording and uploading hope you are getting it now coming today is the auditing class it's only introduction class so what is auditing auditing is the word it is not so easy to define because auditing means it is the meaning of the auditing is to audit the accounts means verify the accounts once the accounting work is completed then auditor work is to verify now how did this auditing word k means it has come from the word adair auditing has come from the word adair this is a latin word a diet what is the meaning of means to hear to hear so once upon a time olden days a person special person is was appointed for auditing work means accounts already completed accounts are written generally the transactions and business was very very small and after completion of accounts one person was appointed to hear what happened what are the accounts what did you write and simply he used to hear that is the reason the auditing has come from the word adair it's a latin word okay now what is the duty of auditor what editor does he does only the verification of all the accounts and giving a certification in the year 1913 we got in india we got this auditing but there's no specifically any qualification or any kind of qualities which are required to the auditor it is not mentioned but auditing was going on and as per the companies act 1956 it has mentioned very clearly auditor should have minimum qualification and then only he is eligible to go for auditing anyway auditing can be done internally externally internally suppose the accounts are prepared by a content immediately the accounts are verified by another accountant that that is internal auditing for that no specific qualification is not required but when you want to appoint others outside of the company and you want a qualified auditor they need to have qualification particular qualification that is chartered accountancy he must be certified qualified chartered accountant as per the chartered accountants association okay so as for that then only he is eligible what the auditor does it simply he has to verify all the accounts and giving a certification that all the accounts are verified by me and everything is clear if any doubts are there at the end of the auditing work he'll be giving a report in that report all the points what he update he'll be mentioning and he'll be signing that is the end of the auditing work though auditing is not compulsory but in some government organizations and public companies it has made compulsory it is compulsory for them because without auditing the accounts are not accuracy you can't say the accuracy of the accountancy verified certified and reliable accounts right in the same way it is very much required and a company wanted to pay tax if accounts are audited tax officers trust these accounts because it's already audited certified and stamped by the auditor it will be easy for the income tax officers also and it it has made mandatory also that is the reason auditing is nowadays for all the public companies and government companies it is compulsory now let's enter into the enter into the auditing what is auditing when when do we start this auditing before going to that if you have an understanding about bookkeeping accountancy and then auditing if you have clarity about these three then you will have a good idea about auditing now let us see what is bookkeeping what is accountancy and what is auditing first of all bookkeeping we have learned in the accountancy financial accounting beginning chapters i told you very clearly what is the duty and what are the main important aspects to be covered in bookkeeping is that generalizing writing the journal entries generalizing then after that posting to the ledger there are entries to be posted into the ledger ledger after that totalling ledger accounts totaling the ledger accounts and then balancing ledger accounts means all together you can say what is the main aspect of bookkeeping means writing journal entries and preparing ledger accounts completely means posting ledger accounts from journal entries and totaling and balancing it so that's the duty of bookkeeping if bookkeeping is completed with this data we can go for the accountancy okay accountancy what do we do basic accountancy i'm talking we have a lot of branches of accounting like cost accounting is there and also you can say financial math financial accounting right management accounting like different accounts are there now right now i'm talking about basic accountancy so what is the duty of basic accountancy means generally rectification of errors here journal entries ledger accounts are ready rectification of errors is there any error or mistake is there that is to be identified just simply identify okay that's one of the duty of accountancy then after that preparing trial balance you know trial balance right trial balance and preparing trading and profit and loss account and preparing the balance sheet that's all this is about the accountancy financial accountancy and in further whatever we want we can prepare like brs bills of exchange consignment royalty accounts and company accounts lic accounts anything branch accounts department accounts whatever you want advance accounts everything you can go ahead but this is the basic of accountancy where this basic accountancy is completed then we can go for the auditing without preparation of the trading profit and loss account and balance sheet no one can go for the auditing what is auditing simply you can say that auditing is checking and verification of the work done by an auditor checking and verification who has to do auditor once the accounts are completed accounts are completed then auditor work starts editor will start his work once accounts are completed ready accounts are ready given to the auditor then he'll start checking out so in one word you can say auditing starts where accounting ends please remember this auditing work starts where accounting ends after completion of accounts then only we can start the auditing so that's about bookkeeping accountancy and auditing how do we go for auditing auditing means nothing but verification of accounts properly and how do we verify the accounts with the proper evidence how do we get the evidence generally voters bills something you have paid so some evidence will be there so that evidence we take and with that consideration of evidence we'll be checking out all the accounts okay verification of accounts is nothing but an auditing right now if you see the steps involved in auditing what are the steps are there in auditing first thing is that uh auditor must study a study of organization and its structure auditor has to study about the organization and its structure suppose a is an auditor he is appointed in uh say a hindustan leaver limited company he is appointed as an auditor in hindustan liver limited so before going to the auditing he must have an understanding about the organization which organization hindustan liberal limited okay so having an understanding and its structure what are its products how many branches are there how they are maintaining the accounting system where can they get the where can he get the accounts means prepared accounts who is responsible where can he get the information if you want any kind of clarification to whom he has to consult like the basic information that is called as a study of organization and its structure is the main basic thing once if he knows about the organization very clearly that this is the organization i know everything and to whom i have to consult from where i can get the information all these things if you get done that first step is over then second step comes to internal control in auditing internal control is also going to work out internal control means who's working and to whom to meet and how the company is controlling its system internal control system also he has to understand right then after that arithmetic accuracy with support of evidence once if he understands this too then he has to go for the arithmetic accuracy calculations simple calculations are clear or not and with the support of evidence without support of evidence no auditing can be done so he'll be doing the calculations with the support of evidence as i told you just know evidence means nothing but orchards or any kind of bills receipts which are supporting that particular transaction transaction is journal entries ladies right this he has to be very careful then after that verification of profit and loss account and balance sheet once if he sees that everything all the entries are clearly with proper support it is maintained then after that he has to go for the verification of profit and loss account and balance sheet once profit and balance she profit and loss account and balance sheet is prepared then accounts are ready you can go for verification everything is clear after verification and end of the work is that preparation of reports who has to prepare auditor auditor has to prepare these reports once the reports are ready then his work is done work is done he verified everything and then after that gone for profit and loss accountant balance sheet and whatever he up that he has to present through a report that's the final stage so these are the main steps involved in any auditing one thing i would recommend you all of you i would suggest you whenever you are hearing this auditing lecture you have to visualize it practically yes or eating auditor is good or doing this work okay he's checking it so it is his duty like you have to imagine some figure some cartoon or you can say any person auditor then he is doing this work and whatever is happening when you visualize it it will be easy for you to understand this never comes out of your mind the topic very easy not only auditing any subject also you can business law business organization or accounts or anything if you visualize it even company law also that will be easy for you to understand and you'll never forget not just examination say point of view right now that's about the steps involved in auditing next we will see few cases very important cases related to the auditing so cases are first case is that fels trustee and anon texter dexter and company so this case it happened in the year 1926 what is the case has given a conclusion the conclusion is that accountants can't be held responsible accountants can't be held responsible for negligence in tracing out fraud actually what is the duty of a content to prepare the accounts only so in this case there they clearly mentioned that accountants are not he'll be responsible can't be held responsible for negligence in tracing out fraud it is not tracing out fraud is not their duty so they are not responsible tracing out fraud as their duty as their duty was to prepare final accounts for the purpose of income tax what is the duty to prepare the final accounts for the purpose of income tax if any fraud occurs they are not held responsible so that is mentioned in this case it means accountants duties are very clearly in this case very clearly mentioned that their duty is to prepare accounts that's all not to detect the frauds not to identify the errors not to identify the frauds it is the duty of someone's so it is not the duty of accountants means they just saved and they protected the rights and duties of a content in this case in the same way after this another important case also you must remember that leech versus stocks bros and pim so this case happened in the year 1937. so in this case also what they have mentioned it is not the part of accountant's duty to audit the accounts accountant's duty is not preparing no no uh it is not the part of the accountant's duty to audit the accounts auditing accounts is not the duty of the accountant it is a duty of someone's they clearly mentioned they have to accountants has to prepare only the accounts not the auditing of the accounts auditing of the duty can be given to someone who is responsible who have good knowledge you must remember very important thing to do the auditing if suppose internal auditing for that there is no qualification is required but external auditing must be a chartered accountant but whether you are doing internal auditing or external auditing a person who is appointed for auditing means they must have a proper and profound knowledge about the accounts then only they'll be able to find out trace out the mystics or frauds are you getting it so that is why they said that it is not the duty of a content to go for auditing of the accounts auditing is not their duty they have to prepare the cons and auditors duty is to trace out the mistakes or frauds and in this case also they have mentioned and in the same case they have mentioned one more important point that is accounting is necessary accounting is necessary means must whereas auditing is a luxury auditing is luxury accounting is necessary accounting means you must know what is happening in the organization proper accounts if you prepare then only you will come to know but whereas auditing is not compulsory it is luxury they have said but if you see in the present scenario this case happened in the year 1937. if you see in the present scenario auditing is not luxury auditing is also necessary and most mandatory compulsory and very much useful to many people and if you'll come to know the usage or other benefits of you of taking this auditing later in the classes but anyway just remember it if accounts are audited you can say that accuracy of the accountancy you can rely that accounts and you can get the loans from that accounts because audited accounts anyone can trust anyone can give you if you want loan if you apply for loan they can give you the loan and at the same time you can show it to the income tax officers also audited accounts they trust immediately they just go for assessment how much tax is to be laid on a particular company so all these benefits you will be having whenever the accounts are audited and another thing also suppose say in my company i want some grants subsidy i want i want to apply if accounts audited then government is going to trust my case will be considered whether i am going to get the subsidy or not that is secondary but my case will be considered as my accounts are showing proper and it is audited by the course like there are many benefits that is why in the present scenario you cannot agree with this statement that accounting is necessary but whereas auditing is also necessary how to say auditing is not luxury if you see the benefits point of view so auditing is also compulsory and necessary this was old case in 1937 case am i clear just remember what is auditing auditing means checking and verifying the accounts accuracy of the accounts with the support of the evidence right now what when does we do the auditing where accounts work is completed where accounts ends then auditing starts we have seen the difference of bookkeeping accountancy auditing and steps also we have seen right so first take out the screenshot or note down in the coming classes we'll see more topics related to the auditing depth of the topics we'll see but stay connected uh one small request if you understand any of our channel class please give a thumbs up that you are understanding mention something a small word in the comment box that you are understanding express your views so that i feel very happy that how you are following it how do i get the feedback because i am not seeing you all and uh i also request you to share these videos with as many students as possible because everything is free of cost i'm taking out lot of time and energy especially for you all so utilize it share it and have a bright career good luck