Back to: Auditing
Hello, dear student
Welcome back to class! This is our first auditing class for the second semester, and I’m really happy to see your bright face.
Please settle down, bring out your notes, and let’s begin. If you have your course outline with you, keep it nearby so you can follow along. Today’s topic is an introduction to auditing.
Lesson Objectives:
By the end of this lesson, students should be able to:
Explain the meaning of auditing in their own words.
State clearly why auditing is important to individuals, organisations, and society.
Give examples of where auditing is done in Nigeria.
What is Auditing?
1. Meaning of Auditing
Auditing is simply the process of checking or reviewing financial records and activities to make sure everything is correct, complete, and follows the proper rules. Think of auditing like when your parents ask you to explain how you spent your pocket money. They want to be sure you used it properly, didn’t waste it, and maybe even saved some. That small check is a kind of auditing too.
In more formal terms, auditing refers to the examination of financial statements and related operations by someone who is not involved in the day-to-day running of the business, to confirm whether the records are accurate and honest.
The person who carries out this work is called an auditor.
2. Purpose of Auditing
Auditing plays an important role in the financial health of any organisation. The purpose of auditing includes:
To confirm accuracy: Auditing helps to confirm that the financial records are correct and not hiding any information.
To prevent fraud and mistakes: When people know their work will be checked, they are more careful. This reduces chances of stealing, lying, or careless errors.
To ensure proper use of money: Auditing checks if the money is used for the right purpose.
To build trust: When investors, government, or customers see that an organisation has clean and correct records, they will trust the organisation more.
To meet legal requirements: In Nigeria, companies are required by law to prepare and audit their financial statements, especially limited liability companies.
3. Areas Where Auditing is Done
Auditing is not only done in companies. It is useful in many other places:
Private companies: Businesses use auditors to review their accounts every year.
Government offices: Auditing is done to check how public money is used.
Banks and financial institutions: They carry out regular audits to protect people’s money.
Churches and mosques: Many religious organisations hire auditors to make sure their funds are used properly.
Schools and universities: Auditing is done to check the use of school fees and government support.
Non-governmental organisations (NGOs): NGOs use auditing to show donors how their funds were spent.
Classroom Interaction
Lecturer: If our class rep collects class dues every month, and then at the end of the semester we ask him to show how he spent the money, what are we doing?
Student Response : We are auditing him.
Lecturer: Correct! That is a simple form of auditing.
Summary of the Lesson:
Today, we have learnt that auditing is the process of checking financial records to make sure they are correct and honest. It is very important because it prevents fraud, builds trust, and helps to use money properly. Auditing is done in many places like companies, banks, churches, and government offices.
Evaluation
Answer the following questions in your notebook.
In your own words, what is auditing?
Mention three reasons why auditing is important.
Give two examples of places where auditing is done in Nigeria.
Who is an auditor?
If your class rep is asked to explain how he spent class money, what process is that?
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