Auditing is the on-site verification activity, such as inspection or examination, of a process or quality system, to ensure compliance to requirements. An audit can apply to an entire organization or might be specific to a function, process, or production step.
Audit is necessary to have accountability & reliability of financial statements which are certified by an independent professionally qualified auditor. Audited statements are accepted by all external agencies i.e. Taxation authorities, financial institutions, banks, Investors etc.