Auditing is the systematic act of examining, verifying and reviewing the accounting records and statement by an independent person considering their accuracy, reliability and effectiveness to provide true and fair result of the operation.

Any two importance of auditing are:

1. Auditing lends credibility to the financial statements prepared by a business.
2. The audited accounts may be presented as an evidence to tax authorities for a fair assessment of tax, and to the court of law in a case of any business dispute.

Auditing is the systematic act of examining, verifying and reviewing the accounting records and statement by an independent person considering their accuracy, reliability and effectiveness to provide true and fair result of the operation. It is the intelligent and critical test of correctness, sufficiency and reliability of accounting data and statements.

According to R. K. Mautz,“Auditing is being concerned with the verification of accounting data, with determining the accuracy and reliability of accounting statements and reports.”

According to Montgomery,“Auditing is a systematic examination of the books and records of a business or other organization, in order to ascertain or verify, and to report upon, the facts regarding financial operations and the results thereof.”

From the above definitions, it is clear that auditingis the act of checking, verifying the records, books of account and financial statement of the entity. It is to ascertain the correctness of the records and verify whether the financial statements truly represent the actual working results and financial position of the organization.

The following are the main importanceof auditing:

1. Credibility
   Auditing lends credibility to the financial statements prepared by a business. It helps to make decisions relating to business activities. Thus, it facilitates the operations of the modern financial system.
   
   
2. Correctness
   It ensures correctness of accounting records, statements and reports as the auditor verifies and examines them properly.
   
   
3. Detection and prevention of frauds and errors
   It attempts to detect and prevent frauds and errors by making thorough checks of accounting documents, records, books and statements.
   
   
4. Alert the staff
   A regular audit makes the staff alert to make all records, books of account and statements up-to-date. Besides, it exercises a moral influence over the staff the act honestly and loyally.
   
   
5. Comparison
   Auditing also facilitates comparison of financial results of different years that helps the business organizations to assess their past performance and plan for the future.
   
   
6. Evidence
   The audited accounts may be presented as an evidence to tax authorities for a fair assessment of tax, and to the court of law in a case of any business dispute.
   
   
7. Settlement of disputes
   The audited accounts are very helpful in an amicable settlement of accounts among partners in a partnership firm. Such a settlement is necessary to avoid disputes among partners particularly at a time of profit distribution, introducing a new partner and retirement or death of an existing partner.
   
   
8. Increase goodwill
   It also helps the business to create a good image in the society. As a result, the business has a high reputation and goodwill.

Any five importance of auditing are explsined below:

1. Credibility
   Auditing lends credibility to the financial statements prepared by a business. It helps to make decisions relating to business activities. Thus, it facilitates the operations of the modern financial system.
   
   
2. Detection and prevention of frauds and errors
   It attempts to detect and prevent frauds and errors by making thorough checks of accounting documents, records, books and statements.
   
   
3. Alert the staff
   A regular audit makes the staff alert to make all records, books of account and statements up-to-date. Besides, it exercises a moral influence over the staff the act honestly and loyally.
   
   
4. Evidence
   The audited accounts may be presented as an evidence to tax authorities for a fair assessment of tax, and to the court of law in a case of any business dispute.
   
   
5. Settlement of disputes
   The audited accounts are very helpful in an amicable settlement of accounts among partners in a partnership firm. Such a settlement is necessary to avoid disputes among partners particularly at a time of profit distribution, introducing a new partner and retirement or death of an existing partner.