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What is auditing?

Painting shows three characters in medieval dress counting money.Petrus Christus [Public domain], via Wikimedia Commons.
Auditing has a long history

Auditing has a long history. As long as there has been trade and bureaucracy, there has been auditing.

Checking an account—Auditing is getting someone who is separate or independent to check something, for example, examining records or accounts to check their accuracy.

The word auditing literally means to listen, and so auditors listen to an account—or record of transactions, trades, decisions, etc.—to check and vouch for its truthfulness. Auditors produce an opinion on whether they think the account is fair.

To this day, this is still the essence of auditing, in both the public and private sectors. Financial audits check whether the financial statements fairly represent the financial position of an entity. Performance audits check whether what was committed to has been done, and been done well.

Changed nature of auditing—In the 163-year history of VAGO, the approach to auditing has evolved. Financial auditing has become risk-based. Performance auditing emerged from this practice. Auditors also identify opportunities for improvement and examples of better practice.

Image describes the separation of powers

Independence is critical to auditing

Importance of independence—For all this to work, the auditor must be independent. Auditors can’t expect, or be seen to expect, any favour or recrimination from either the person entrusting or the person entrusted. The Victorian Auditor-General’s independence is enshrined in the Victorian Constitution, and this can only be changed by a referendum.

 

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Last updated on 30/06/2016