Origin: The origin of auditing may be traced to Middle Ages but the audit in its present form and concept can be traced after the introduction of large-scale production as a result of industrial revolution during the 18th century. Stabilised governments, expansion of banking facilities and introduction of limited companies, improved means of communication are all responsible for the origin of auditing.
Need: The expansion of business activities, more and more involvement of owners in controlling business, increase in responsibilities of the lords and manners in government matters, delegation of funds by investors and others, management of business by directors, managers etc, made the direct control and supervision loose and less effective. The administrators of businesses and government funds became the sole authority. So it was found necessary to put some kind of check and moral pressure on their free-hand working; lavish expanding and misappropriations. The introduction of government levies and tax, their recovery and spending also increased the importance of some sort of check. Hence the need for auditing.
The need of auditing may well be expressed by saying that auditing is a careful searching of the books of accounts by comparing them with the documents and papers from which they have been written up and thus trying to find out whether the profit or loss for a particular period and the financial position as shown by the balance sheet are correct and true and fair.
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