AUDIT

examination of the records and reports of an enterprise by accounting specialists other than those responsible for their preparation. Public auditing by independent accountants has acquired professional status and become increasingly common with the rise of large business units and the separation of ownership from control. The public accountant performs tests to determine whether the management's statements were prepared in accord with acceptable accounting principles and fairly present the firm's financial position and operating results; such independent evaluations of management reports are of interest to actual and prospective shareholders, bankers, suppliers, lessors, and government agencies. In English-speaking countries, public auditors are usually certified, and high standards are encouraged by professional societies. Most European and Commonwealth nations follow the example of the United Kingdom, where government-chartered organizations of accountants have developed their own admission standards. Other countries follow the pattern in the United States, where the states have set legal requirements for licensing. Most countries have specific agencies or departments charged with the auditing of their public accounts (e.g., the General Accounting Office in the United States and the Cour des Comptes in France). Internal auditing, designed to evaluate the effectiveness of a business' accounting system, is relatively new. Perhaps the most familiar type of auditing is the administrative audit, or pre-audit, in which individual vouchers, invoices, or other documents are investigated for accuracy and proper authorization before they are paid or entered in the books.