As we approach the year 2000, there is increasing publicity, fuelled incessantly by major financial scandals (such as BCCI, Barings) concerning auditing and the work of auditors. It is a subject with ever-widening horizons, continually developing, in both the scope of what is regarded as the activity of auditing and the nature of the approaches/practices adopted in undertaking that activity. All those who rely on financial statements are affected by the auditor's work, yet the nature, practice and limitations of auditing are not well known outside the auditing profession.

To the layperson, auditing has tended to be an obscure or misunderstood subject. What actually is an audit and how does it differ from accounting? The nature of auditing in terms of its underlying principles leads to to questions of why audits should take place at all, who should normally be required to have them and what the basic statutory audit requirements should be. The scope of the audit is highlighted by the various financial statements and accounting records which are subject to an audit. The conduct of audits, auditing standards and the nature of an auditor's report (the only tangible product to outside parties at the end of the audit) are just some of the important issues that need to be addressed.

The comments above apply primarily to the external audit of companies. However, the basic points also apply to the audits of other organizations (such as central government, banks, trade unions) although the scope of the audit then required by the relevant statute or organization may stipulate further audit requirements.

It is important to stress that auditing ahs its limitations; an auditor's report is only an opinion that provides a reasonable assurance that accounts can be relied upon, not a guarantee of truth. For example, audited financial information is of value only so long as it is reasonably current. Also, it is not the auditor's duty to prevent or detect frauds. Thus, although audited statements are very valuable, they should not be used solely to assess the financial strength of an organization.