Definition of Economic Development

Economic development is a process of economic transition involving structural transformation of an

economy through industrialization, raising gross national product and per capital income.

According to Lewis, Economic development means increase in output per head.

According to Michael Todaro, Economic development must be conceived of as a multi-dimensional

process involving major changes in social structures, people's attitudes, national institutions, acceleration
of economic growth and reduction of inequality.

According to Kindle Berger, Economic development means an increase in output of goods and services in
the economy. It is more important than economic growth because economic development is more
comprehensive process than economic growth. Economic growth is a quantitative term as it represents
quantitative increase in the production of goods, services and factors of production, whereas economic
development is a qualitative terms as it indicates continuous increase in real national income and
structural changes in the economy of a country.

Definition of Economic Growth Economic growth means more production of goods and services growth
is measured in terms of an increase in real gross national product (GNP or GDP) or an increase in per
capital income.

According to Micheal Todaro, Economic growth is a steady process by which the productive capacity of
an economy increases overtime to bring rising levels of national output and income.

Objectives of Economic Development

1. Increase of supply of food, clothing, health and education facilities.

2. Increase in standard of living of the people.
3. Increase in leisure, political freedom and equal opportunities of life.
4. Increase in capital formation that is new buildings and industries. Measurement Measurement of
Economic Development Previously four methods including, national income method, per capital income
method, welfare method and social indicators method were used for the measurement of economic
development of a country but non of them provided an acceptable answer.

According to Prof. Todaro, The Human Development Index method, which is prepared by United Nations
Development Program is the best method, which should be adopted by the nations and organizations.
This method includes the opportunities for education, health, income, employment, environment and
economic freedom.

Measurement of Economic Growth

1. Increase in the real gross national product.

2. Increase in the real per capital income.
3. Increase in the general welfare of the masses.
4. Increase in social, economic and human development.

Factors Needed For Economic Growth

Ability of an economy to produce more goods and services depends on the following factors:
1. An increase in stock and quality of its capital goods.
2. An increase in quantity and quality of its labor force.
3. An increase in quantity and quality of its natural resources.
4. An efficient use of factor inputs so as to maximize their contribution to the expansion of output, through
improved productivity.
5. Development and introduction of innovative techniques and new products i.e. technological
progressiveness.
6. An increase in level of demand to ensure full utilization of the increased productive capabilities of the
economy.
Achievement of a high rate of economic growth is one of the main objectives of macro economic policy.
The significance of economic growth lies in its contribution to the general prosperity of the community.
Growth is desirable because it enables the community to consume more goods and services. It also
contributes to the provision of a greater quantity of social goods and services such as health and
education, thereby improving real standard of living of the people. Govt. can stimulate growth process by
increasing current spending in the economy through tax cuts by Fiscal policy and by increasing money
supply and reducing interest rates by adopting Monetary policy.

Economic Factors Needed For Economic Development

1. Natural Resources Natural resources are one of the three main factors of production the other two are
labor and capital. Natural resources include area of land, forests, rivers, climate and mines. If a country is
rich in better quality of all natural resources, it will develop economically at a fast speed.
2. Capital Formation It is the process of adding net physical capital stock of an economy. Capital
formation creates productive potential for future production. Capital formation has three stages namely
savings financial institutions and capital market for mobilization of savings act of investment in
machinery and buildings.
3. Specialization Output is greater as a result of specialization. Specialization enables an economy to use
its scarce resources more efficiently, thereby producing larger volume of goods and services. It increases
the rate of economic development of a country.
4. Technology Inventions and innovations reduce manufacturing and distribution costs. Technological
progress serves to change cost conditions in the long run; thus technological changes play an important
role in the economic development.
5. Transport and Communication Efficient communication facilities increase the production capacity of all
sectors of the economy. It reduces cost of production, increases mobility of goods within and outside the
country.
6. Entrepreneurship If an entrepreneurship is capable, skillful and trained then out put of his organization
will be greater. Entrepreneurship results in the introduction of new types of output, new techniques and
new sources of supply of inputs for business and industry.

Non-Economic Factors

1. Social Values and Attitudes It includes culture, religion and life style of a society. Some societies are
orthodox and do not like material approach of life. Religion does not allow them to keep themselves busy
day in and day out for material prosperity. Most societies believe in festivals and different cultural
ceremonies. They do not prefer to save money; hence savings rate reduces too much. In such societies
material gains are not appreciated.
2. Political Stability Strong and stable Governments can prepare five-year development plans, they can
enforce monetary and fiscal policies and change social attitudes and institutions, which may be
progressive one. The frequent changes in Govt. setup results in the lack of concrete economic policy
decisions.
3. Administrative Efficiency Educated, trained, skillful and hardworking Govt. officers can push
development of a country at a very fast speed, whereas untrained administration of a country retards the
economic development.
4. Economic Freedom Private ownership of resources and maximum freedom to deploy these resources
in line with profit signals create strong incentives to work hard. If every body is allowed to participate in
economic activity, then due to competition the rate of economic development will increase.
5. Right of Private Property Private ownership of the means of production results in the increase in supply
of goods and services. In order to own and accumulate profit and property, people work hard, thus trade
and business activity flourishes.

Difference between Economic Development and Growth

Economic Development Economic development is a qualitative term as it indicates continuous increase

in the real national income and structural changes in the economy of a country. It means increase in
output of goods and services in an economy. Economic development is more important than economic
growth because economic development is wider and more comprehensive process than economic
growth. Economic development is a process of economic transition involving structural transformation of
an economy through industrialization, raising GNP and per capital income.

Economic Growth Economic growth is a quantitative term as it represents quantitative increase in

production of goods and services in an economy. Economic growth is a steady process by which the
productive capacity of an economy increase overtime to bring about rising levels of national output and
income. Economic growth is the name of more production. Growth is measured in terms of an increase in
real gross national product (GNP/GDP) over time or an increase in per capital income.

Definition of Economic Development

Economic development is a process of economic transition involving structural transformation of an

economy through industrialization, raising gross national product and per capital income. According to
Lewis, Economic development means increase in output per head. According to Michael Todaro,
Economic development must be conceived of as a multi-dimensional process involving major changes in
social structures, people's attitudes, national institutions, acceleration of economic growth and reduction
of inequality. According to Kindle Berger, Economic development means an increase in output of goods
and services in the economy. It is more important than economic growth because economic development
is more comprehensive process than economic growth. Economic growth is a quantitative term as it
represents quantitative increase in the production of goods, services and factors of production, whereas
economic development is a qualitative terms as it indicates continuous increase in real national income
and structural changes in the economy of a country. Definition of Economic Growth Economic growth
means more production of goods and services growth is measured in terms of an increase in real gross
national product (GNP or GDP) or an increase in per capital income. According to Micheal Todaro,
Economic growth is a steady process by which the productive capacity of an economy increases overtime
to bring rising levels of national output and income. Objectives of Economic Development 1. Increase of
supply of food, clothing, health and education facilities. 2. Increase in standard of living of the people. 3.
Increase in leisure, political freedom and equal opportunities of life. 4. Increase in capital formation that is
new buildings and industries. Measurement Measurement of Economic Development Previously four
methods including, national income method, per capital income method, welfare method and social
indicators method were used for the measurement of economic development of a country but non of them
provided an acceptable answer. According to Prof. Todaro, The Human Development Index method,
which is prepared by United Nations Development Program is the best method, which should be adopted
by the nations and organizations. This method includes the opportunities for education, health, income,
employment, environment and economic freedom.

Measurement of Economic Growth

1. Increase in the real gross national product.

2. Increase in the real per capital income.
3. Increase in the general welfare of the masses.
4. Increase in social, economic and human development.

Factors Needed For Economic Growth

Ability of an economy to produce more goods and services depends on the following factors:
1. An increase in stock and quality of its capital goods.
2. An increase in quantity and quality of its labor force.
3. An increase in quantity and quality of its natural resources.
4. An efficient use of factor inputs so as to maximize their contribution to the expansion of output, through
improved productivity.
5. Development and introduction of innovative techniques and new products i.e. technological
progressiveness.
6. An increase in level of demand to ensure full utilization of the increased productive capabilities of the
economy.
Achievement of a high rate of economic growth is one of the main objectives of macro economic policy.
The significance of economic growth lies in its contribution to the general prosperity of the community.
Growth is desirable because it enables the community to consume more goods and services. It also
contributes to the provision of a greater quantity of social goods and services such as health and
education, thereby improving real standard of living of the people. Govt. can stimulate growth process by
increasing current spending in the economy through tax cuts by Fiscal policy and by increasing money
supply and reducing interest rates by adopting Monetary policy.

Economic Factors

Economic Factors Needed For Economic Development

1. Natural Resources Natural resources are one of the three main factors of production the other two are
labor and capital. Natural resources include area of land, forests, rivers, climate and mines. If a country is
rich in better quality of all natural resources, it will develop economically at a fast speed.
2. Capital Formation It is the process of adding net physical capital stock of an economy. Capital
formation creates productive potential for future production. Capital formation has three stages namely
savings financial institutions and capital market for mobilization of savings act of investment in
machinery and buildings.

3. Specialization Output is greater as a result of specialization. Specialization enables an economy to use

its scarce resources more efficiently, thereby producing larger volume of goods and services. It increases
the rate of economic development of a country.
4. Technology Inventions and innovations reduce manufacturing and distribution costs. Technological
progress serves to change cost conditions in the long run; thus technological changes play an important
role in the economic development.
5. Transport and Communication Efficient communication facilities increase the production capacity of all
sectors of the economy. It reduces cost of production, increases mobility of goods within and outside the
country.
6. Entrepreneurship If an entrepreneurship is capable, skillful and trained then out put of his organization
will be greater. Entrepreneurship results in the introduction of new types of output, new techniques and
new sources of supply of inputs for business and industry.

Non-Economic Factors

Non-Economic Factors

1. Social Values and Attitudes It includes culture, religion and life style of a society. Some societies are
orthodox and do not like material approach of life. Religion does not allow them to keep themselves busy
day in and day out for material prosperity. Most societies believe in festivals and different cultural
ceremonies. They do not prefer to save money; hence savings rate reduces too much. In such societies
material gains are not appreciated.
2. Political Stability Strong and stable Governments can prepare five-year development plans, they can
enforce monetary and fiscal policies and change social attitudes and institutions, which may be
progressive one. The frequent changes in Govt. setup results in the lack of concrete economic policy
decisions.
3. Administrative Efficiency Educated, trained, skillful and hardworking Govt. officers can push
development of a country at a very fast speed, whereas untrained administration of a country retards the
economic development.
4. Economic Freedom Private ownership of resources and maximum freedom to deploy these resources
in line with profit signals create strong incentives to work hard. If every body is allowed to participate in
economic activity, then due to competition the rate of economic development will increase.
5. Right of Private Property Private ownership of the means of production results in the increase in supply
of goods and services. In order to own and accumulate profit and property, people work hard, thus trade
and business activity flourishes.

Difference between Economic Development and Growth

Economic Development Economic development is a qualitative term as it indicates continuous increase

in the real national income and structural changes in the economy of a country. It means increase in
output of goods and services in an economy. Economic development is more important than economic
growth because economic development is wider and more comprehensive process than economic
growth. Economic development is a process of economic transition involving structural transformation of
an economy through industrialization, raising GNP and per capital income.

Economic Growth Economic growth is a quantitative term as it represents quantitative increase in

production of goods and services in an economy. Economic growth is a steady process by which the
productive capacity of an economy increase overtime to bring about rising levels of national output and
income. Economic growth is the name of more production. Growth is measured in terms of an increase in
real gross national product (GNP/GDP) over time or an increase in per capital income.

B.COM Part II NotesChapter 2

AGRICULTURAL DEVELOPMENT
Importance of Agriculture
Agriculture is backbone and the largest sector of Pakistan's economy, which plays a very important role in
its development. It provides food i.e. wheat, rice, pulses, vegetables, fruit and other items for growing
population of the country. Nearly 22% of total output (GDP) and 44.8% of total employment is generated
in agriculture. It contributes substantially to Pakistan's exports.Agriculture also contributes to growth as a
supplier of raw materials to industry as well as market for industrial products. Performance of agriculture
during the year 2005-06 has been weak because its crops sector particularly major crops could not
perform up to the expectations. Growth in the agriculture sector registered a sharp recovery in 2006-07
and grew by 5.0 percent as against the preceding year's growth of 1.6 percent. Agriculture employs 30%
of work force. Country's 67% population lives in villages. It contributes about 25% to GDP. It provides raw
material such as cotton, sugarcane, tobacco, cottonseed, edible oil seeds, citrus fruits, leather, wool,
wood and other items for various industries. Major crops accounting for 35.2% of value added in
agriculture, registered a decline of 3% as production of two of the four major crops, namely cotton and
sugarcane has been significantly less for a variety of reasons including excessive rains at the time of
sowing, high temperature at flowering stage, late harvesting of wheat crop, strong base effect (cotton)
and incidence of frost, damaging sugarcane crop in the month of January 2006. Pakistan's agriculture has
been suffering, off and on, from severe shortage of irrigation water in recent years.

Main Features of Agriculture

1. Main source of food supply.

2. Provides employment opportunities.
3. Major source of national income.
4. Provides raw material for industries.
5. Good market for agricultural machinery and equipment.
6. Market for fertilizers, pesticides and insecticides.
7. Main sour of foreign exchange earnings.
8. Expands industrial goods market.

Major Agricultural Crops.

There are two principal crop seasons in Pakistan, namely Kharif, sowing season begins in April-June and
harvesting during October-December and Rabi, which begins in October-December and ends in April-
May. Rice, sugarcane, cotton, maize, bajra and jowar are Kharif crops, whereas,wheat, gram, tobacco,
rapeseed, barley and mustard are Rabi crops. Major crops wheat, rice, cotton and sugarcane account for
90.1 percent of the value added in the major crops.

1. Cotton Cotton is not only an export-earning crop but also provides raw material to the local textile
industries. Pakistan is one of the largest cotton producing and consuming countries in the world. Under
the WTO post quota scenario, the country appears to have the potential of becoming a leading force in
the worldwide cotton and textile market place. There is also growing realization in the country that future
gains in value added from cotton are only possible through qualitative improvement in raw cotton. Cotton
accounts for 8.6 percent of the value added in agriculture and about 1.9 percent in GDP. Factors
responsible for the decline in cotton production include: Excessive rain at the time of sowing. High
temperature at flowering stage. Late wheat harvesting resulting in decline of area under the crop. Pest
attack in some cottons growing areas of Punjab and Sindh.

2. Rice Rice is an important food cash crop. It is also one of the main export items of country. It accounts
for 5.7 percent of the total value added in agriculture and 1.2 percent to GDP. Area and production target
of rice for the year 2006-07 were set at 2575 thousand hectares, 0.2 percent higher than the target and
4% higher than last year. The size of the crop estimated at 5438 thousand tons, 2.0 percent lower than
the last year and 4.5 percent lower than the original target.

3. Sugarcane Sugarcane crop serves as a major raw material for production of white sugar and gur.
Sugarcane crop is highly water-intensive and an important crop. Sugar production in the country mostly
depends on this crop, though a small quantity of sugar is also produced from sugar beet. Its share in
value added of agriculture and GDP are 3.5 percent and 0.7 percent respectively. The higher sugarcane
production is the result of increase in area, timely rains and judicious application of fertilizer, improvement
in cultural practice, better management and attractive prices offered by the millers.

4. Wheat What is the main staple diet of country's population and largest grain crop of the country. It
contributes 14.4 percent to the value added in agriculture and 3.0 percent to GDP. Area and production
target of wheat for the year 2006-07 were set at 8459 thousand hectares and 22.5 million tons
respectively. Wheat was cultivated on an area of 8494 thousand hectares, showing 1.0 percent increase
over last year and 0.4 percent increase over the target. The size of wheat crop is, however provisionally
estimated at 23.52 million tons, highest wheat production in the country's history, which is 10.5 percent
higher that last year and 4.5 percent higher than the target. Higher production is due to following reasons.
The certified wheat seed availability was 50,000 tons more than last year to 2,17,000 tons. The urea
fertilizer availability for Rabi crop was 4.714 tons, which was more than the area requirements of 2.9
million tons for Rabi. Moreover subsidy was extended to phosphatic and potassic fertilizers. The price of
50 kg. bag of these fertilizers were reduced by Rs. 250 and further to Rs. 400 per bag to promote
balanced use of fertilizers. The water availability for Rabi was 31.2 million acre feet. This was an
improvement of 3.7 percent over the last year Rabi water use of 30.1 million acre feet. Last year the
agricultural credit disbursement to farmers was Rs. 130 billion. This year credit availability has been
increased to Rs. 160 billion. The banks were also instructed to focus on small and medium scale growers
for credit disbursement.

Minor Agricultural Crops.

1. Oilseeds The major oilseed crops include cottonseed, rapeseed/mustard, sunflower and canola etc.,
the total availability of edible oils in 2005-06 was 2.905 million tons. Local production stood at 0.793
million tons which accounts for 27 percent of total availability while the remaining 73 percent was made
available through imports. During 2006-07 local production of edible oil is provisionally estimated at 0.855
million tons. During this period, 2.201 million tons edible oil was imported and 0.349 million tons edible oil
was recovered from imported oilseeds. The total availability of edible oil from all sources amounted to
3.405 million tons during 2006-07.

2. Other Minor Crops The production of two pulses namely mung and masoor were higher by 21.5
percent and 17.9 percent respectively during 2006-07. However production of mash decreased by 3.6
percent. The main reason for decline in production of mash as compared to last year has been the
shortfall of area dedicated to the crop, which declined by 4.6 percent. The production of potato was
significantly higher by 67.2 percent and stood at 2622.3 thousand tons while it was 1568 thousand tons
last year. However the production of onion decreased by 14.3 percent mainly due to 16.5 percent
reduction in corp area. The production of chilies is decreased by 49.6 percent as 32.4 percent area of the
crop decreased due to excessive rains in Sindh.

Problems of Agriculture

1. Old Methods of Cultivation Primitive methods of cultivation i.e., use of wooden Hul, Phaora, Sohaga
and Bail (Oxen) cannot increase output. It is therefore the need of the day that our farmers should use
tractors, threshers, bulldozers and tube-wells.

2. Shortage of Finance Our farmer is poor. In order to meet his demand he borrows money from relatives,
friends and money lenders at a very high interest rate. Due to shortage of finance he cannot adopt new
methods of cultivation.

3. Lack of Irrigation Facilities Development and progress of agriculture is based on regular supply of
sufficient quantity of water. Rains in Pakistan are uncertain and unpredictable, whereas irrigation system
is
unsatisfactory. Inadequate water supply through irrigation system, i.e., from wells, ponds and canals are
causing low agriculture productivity.

4. Under Utilization of Cultivation Land The total area of Pakistan is 80 million hectares out of which 22
million hectares of land i.e. 25% land is being cultivated. Due to various reasons a greater potion of land
is not used for cultivation purpose, that's why our agriculture output is low. We should bring a greater
portion of land under the use of agriculture.

5. Uneconomic Holdings It means small area of land, which is uneconomical to cultivate. Due to
inheritance system, land is divided and subdivided into small pieces, making it uneconomical to cultivate.
Small and scattered holdings produce less output.

6. Concentration of Land Ownership In Paksitan, Jagirdars and Zamindars who one majority of land area
live in big cities and do not take much interest in the development of agriculture. They give their lands to
landless people for cultivation on the basis of heavy Lugan and Batai (some agreed proportion of output).
Since a greater portion of output goes to the zamindars and very less is left to small and poor peasants,
they get frustrated and do not take interest to raise productivity.

7. Inadequate Supply of Inputs Our farmers uses poor quality seeds. Due to lack of finance and ignorance
he do not use fertilizers, insecticides, pesticides, improved high yielding seeds and modern machinery,
therefore his output keeps on decreasing.

8. Water Logging and Salinity With the continued use lands have become waterlogged and saline.
Excess and salty water is very harmful for production of agricultural goods. This situation is decreasing
area of cultivatable land.

9. Soil Erosion Winds and floods take away fertility of land, causing the land sandy and barren, thus
output decreases drastically.

10. Natural Calamities Heavy rains, floods, droughts, hailstorms and pest attacks are frequent in our
agricultural sector causing heavy damages to the standing crops.

11. Insufficient Infrastructure Stores, power supply and road facilities are very less, which hampers
development of agriculture sector. Produce is stored on open places, which is destroyed due to rain,
winds and insects.
12. Absence of Regulated Markets Markets are far away and there is no transport with the farmers. It is
very difficult to carry the products to far-flung markets therefore farmers are forced to sell their produce at
a low price to the local commission agents.

13. Lack of Education and Training Our farmer is uneducated and untrained. He does not know the latest
multiple cropping, pest, control equipment, the use of technology and other modern farming practices. All
this results decrease in output per hectare.

14. Improper Agriculture Research Research facilities in agricultural sector result in the development of
better quality seeds, modern storage facilities, economical use of water, cheap fertilizers, effective low
cost insecticides and locally produced cheap machinery. Due to shortage of funds proper research is not
being carried out in this field.

15. Lack of Alternative Occupations In case of failure of crop due to some reason, our farmers become
distressed. They live from hand to mouth and their source of income dries down. There is lack of agro-
based industries such as dairy, poultry and livestock farms, which may increase income of farmers during
off-season.

Measures for Improving Agricultural Marketing

1. Department of Agricultural Marketing Government has established Agricultural Marketing Department

in order to improve marketing system of agricultural crops. Department surveys the agricultural marketing
and prepares its recommendations for provincial departmental. It also develops agricultural cooperative
marketing.
2. Construction of Farm to Market Roads Government is constructing roads and bridges to link farms with
markets in order to reduce time and cost of transportation. Quick and easy accessibility of markets will
increase income of farmers and their economic position will improve.
3. Price Awareness Govt. through newspapers, radio and television is providing information to farmers
about current prices of different crops, fertilizers, insecticides and other inputs, which are prevailing in
different markets and cities. Special programs are being broadcast regularly for awareness about modern
techniques of cultivation. Modern methods of cultivation are being taught through TV programs.
4. Big Stores and Cold Storages Stores and cold storages are being constructed in regulated markets so
that the farmers output may not be destroyed. These facilities also help in stabilizing prices of the
produce. Tax concessions are given to those who construct stores.
5. Regulated Markets and Uniform Weight Measurements Regulated markets are being set up and
uniform weights and measurement system has been introduced so that the farmers may not be cheated
and they may get the proper return of their produce. In regulated markets, Market Committee system has
been introduced which controls and solve these problems. Moreover attention is being paid on standards
and grade of the produce.
6. Education and Training Main cause of all evils in agricultural sector is lack of education and training of
farmers. Govt. has started providing education/training facilities about modern methods of cultivation and
marketing of agricultural output. Staff of regulated markets is being trained in order to manage marketing
system in a decent manner.

INDUSTRIAL DEVELOPMENT
Importance of Industries Industries play a dominant role in the economic development of a country.
Western countries enjoy all comforts and luxuries of life due to higher productivity of goods and services
in their countries. This is due to industrialization. Unfortunately there were no industries when Pakistan
came into being but now wit the efforts of Govt. and the people there is an improvement in this regard
however more is required to be done. The overall manufacturing sector continued on its strong positive
trend during the current fiscal year 2006-07. Overall manufacturing recorded and impressive and broad
based growth of 8.45 percent in 2006-07, against last year's growth of 9.9 percent. Large scale
manufacturing account for 69.5 percent of overall manufacturing registered an impressive growth of 8.75
percent in the current fiscal year 2006-07 against last year's achievement of 10.68 percent. There has
been a slight decline in growth in the manufacturing sector due to multiple reasons like reduced
production of cotton crop, sugar shortage, steel and iron problems and the last but not the least global oil
prices. All of these reasons contributed to reduced growth in 2006-07 but high levels of liquidity in the
banking system, an investment friendly interest rate environment, a stable exchange rate, low inflation,
comfortable foreign exchange reserves, stronger domestic demand for consumer durables and high
business confidence among other things will again boost the manufacturing sector growth rate up to a
reasonable level.

Main Industries of Pakistan

1. Textile Industry The share of textile industry in the economy along with its contribution to exports,
employment, foreign exchange earnings, investment and value added makes it the single largest
manufacturing sector. It contributes around around 8.5% to GDP, employs 38% of total manufacturing
labor force and contributes between 60-75% to total merchandise exports. Pakistan is one of the largest
textile exporters in the world. The variety of products ranges from cotton yarn to knitwear. Garment made-
ups and bed wear are most important export products with an export value of about $1.35 billion each.
Knitwear, ready-made garments and cotton yarn also have important shares in total exports. Major
importers of textile products are USA, European Union, UAE and Saudi Arabia.
2. Automobile Industry The auto industry growing is fast and may soon begin to achieve economies of
scale. The tremendous rise in automobile demand has resulted in increased production, giving a healthy
impetus to industrial output and generating over 1,50,000 direct employment opportunities besides
contributing tax revenue to the Govt. since 2001-02 the automobile market is growing rapidly by over 40%
per annum. Long-term investment friendly policies of Govt. and up-gradation of production facilities
considered as pre-requisite by experts.
3. Fertilizer Industry In order to promote the use of fertilizer. Govt. offered various incentives, which
ultimately resulted in excessive demand for fertilizer. The fertilizer use in Pakistan is a growth story in the
field of agriculture. Presently they are 10 manufacturing units in operation. Out of these, four units are
located in public sector and six are in private sector. The average annual growth of the fertilizer sector is
at 6% per annum. Its share in GDP is 0.5%.
4. Paint and Varnish Industry There are 22 units in organized and 400 units in unorganized sector for the
manufacture of paints and varnishes. The per capital consumption of paints in Pakistan is low. The
demand for paints and varnishes is rising due to the resurgence of housing and construction sector.
5. Cement Industry Cement industry has shown significant growth. At the moment there are 27 cement
manufacturing units in the country. The boost during the period in the performance of cement industry
activity is because of high level of construction activity in country and increased development expenditure
of the government.
6. Home Appliance Industry Production of television, refrigerators, deep freezers and air conditioner has
almost doubled in the last three years. The pace of growth in demand for home appliances is the direct
result of the banks and leasing companies policy of consumer financing package. Many dealers have
initiated their own schemes of easy installments, which is further increasing demand.

Importance of Industries in Economic Development

1. Increase in National Income Progress of industrial sector of the country results greater production of
goods and services. Output of goods and services is known as GDP. Increase in national income
increases per capital income of the people. Higher per capital increases general welfare of people and
standard of living of masses improves.
2. Increase in Employment Opportunities Industries create may types of employment opportunities.
Disguised unemployment prevailing in agricultural sector is removed as labor moves for jobs to the cities.
Increase in employments results increased savings, which is utilized for further investment in industries.
3. Increase in Productive Capacity Industrialization increases productive potential. Specialization results
in mass production of superior quality goods at a cheaper cost. Greater employment opportunities
increase income; income increases demand for goods for goods and services and increases in demand
increases investment in industries and other sectors of economy. Effective demand through
acceleration principle increases investment and a small investment through multiplier effect increases
national income many times and in order to meet demand of people productive capacity develops.
4. Development in Agriculture Agriculture is backbone of the economy of Pakistan whereas agriculture
itself depends upon the progress of industries. Industries produce all inputs that are needed by agriculture
such as fertilizers, insecticides and machinery etc. Agricultural output such as cotton, sugarcane, edible
oils, fruits, tobacco etc becomes input for industries. All these factors increase income of farmers. Thus
agriculture and industries are inter-dependent sectors of economy.
5. Increase in Government Revenue Industries provide revenue to the Govt. through different sources
such as tax on the profit of the company, income tax, sales tax, excise duty, import duty, export duty.
Thus industries provide a greater proportion of taxes to the Govt.
6. Improvement in Balance of Payments Exports of industrial goods increases foreign exchange earnings.
Likewise processing of raw material reduces expenditure on imports and foreign exchange earnings
improve balance of payments of Pakistan.
7. Economic Stability and Political Domination Arms, ammunitions, communication appliances, vehicles
and other defense requirements are produced by domestic industries, which make defense of Pakistan
strong. Industrialization provides economic and political stability. It provides name and fame in
international community. Hence a political domination is achieved.

Measures for Industrial Development

1. Industrial Trading Estates Government has established industrial trading estates where the entire basic
infrastructure such as road, communication, water, gas, power, banks, police protection etc., has been
provided. Most famous industrial estate of Pakistan is Sindh Industrial Trading Estate.
2. Technical Training Centers In order to remove shortage of technical labor, Govt. has established
Polytechnic Institutes and colleges in various industrial cities.
3. Tax Concession In order to develop industrial sector, Government has granted tax holidays and
concessions to the industries.
4. Research Institutes For progress and development of industries Government has established many
research institutes, which are directly or indirectly assisting industrial sector. The most important research
institutes are Pakistan council of Scientific and Industrial Research, Central Testing Laboratories and
Pakistan Standard Institute.
5. Protection Policy In order to protect new and infant industries, Government has adopted the protection
policy for new industries i.e., Goods, which are produced by the local industry are not allowed to be
imported, so that local industry may grow quickly. 6. Export Processing Authority/Zones Separate export
processing zones have been established where those industries are established which are engaged in
production of exportable goods. Entire infrastructure is made available their and all facilities are given to
these industries in order to increase export earnings of the country.
7. Export Promotion Bureau This Government department helps in the exports of locally produced goods
by arranging exhibition, seminars and inviting prospective foreign investors. It also arranges exhibitions of
Pakistani products in international markets and disseminates different types of information for progress
and development of industrial sector.
8. Provision of Industrial Credit In order to meet loan requirement, both in local and foreign currency,
Govt. has established many financial institutions such as Industrial Development Bank of Pakistan,
Pakistan Industrial Credit and Investment Corporation., Investment Corporation of Pakistan, National
Investment Trust etc.
9. Investment-Friendly Rate of Interest Government has reduced rate of interest so that the investors may
feel happy to borrow and invest in industrial sector. Low rate of interest increases margin of profit thus
businessmen establishes more industries in the country.
10. Revival of Sick Industries Many industries, which had were closed, are now being revived. Their dues
of taxes, loans and interest etc have been drastically reduced and they are now being put into operation.
This is being done so that the industries may become prosper and export earnings of the country may
increase.
11. Privatization Policy Most of the State owned industries are inefficient and are running in losses, when
these will be transferred to private sector, their administration will improve and non-development
expenditures decrease to a greater extent, their efficiency will increase and such industries will be
converted into profitable ventures.

Small Scale Industries.

Importance of Small-Scale Industries

1. Use of Local Machinery and Local Raw Material Small industries can be set up easily because no
technical and administrative expertise and training is required. Since in it local machinery and local raw
material is used therefore no foreign exchange is required.
2. Employment Opportunities These industries provide greater employment opportunities to local people.
The disguised unemployment is reduced and migration of people towards cities for search of jobs is
reduced. Since unemployment person can get job in small industries, the rate of dependent persons is
reduced.
3. Increase in Standard of Living These industries provide job opportunities, income of people increases,
which result in the increase in standard of living. These also reduced income disparity between the rich
and the poor.
4. Increase in Export Earnings Foreigners heavily demand goods produced by small industries, which
results in the increase in foreign exchange earnings of Pakistan. These enterprises increase name and
fame of Pakistan in international market.
5. Act as By-Product and Subsidiary Industries Small industries purchase wasted raw material of large
industries to be used in their own production process, thus they increase income of large-scale industries.
These industries manufacturing nuts, bolts and spare parts required by large industries at a very low
price, hence both of them are benefited with each other.
6. Expansion in Home Market SMEs produce goods keeping in view needs and requirement of local
market therefore home market is expanded. Increased supply of goods increases business activity and
national income. With increase in output the prevailing high rate of inflation can be controlled.
7. Diversification in Industrial Products Goods using different types of material result in diversification of
product. Different varieties of goods are produced according to the demand of different customer's
purchasing power.

Privatization Policy. Privatization is a process by which Govt. owned factories and services are
transferred to private sector by their sale. Foreign investors can also purchase these industries and
services. In order to sale Govt. enterprise open bids are invited from private sector. In some cases shares
of the enterprises are sold through Stock Exchanges. Deregulation means reducing the rules and
regulations and to make investment easy for local and foreign investors. Now any foreign national can set
up his business anywhere in Pakistan without under going a complicated procedure of government
permission. Privatization process varies somewhat depending on the nature of the asset being privatized,
on the proportion of shares being offered for privatization and on whether a transfer of management is
involved. Privatization Commission prepares the summary justifying the need for privatizing the property
and the regulatory framework. Once endorsed by the Board of Privatization Commission, it is submitted to
Cabinet for approval.

Advantages of Privatization.
1. Increase in efficiency and Profitability Most Govt. industries and services are inefficient and running in
losses, when these will be transferred to private sector, their administration will improve and non-
development expenditures will be reduced, their efficiency will increase and will be converted into
profitable ventures.
2. Increase in Foreign Investment and Export Earnings Privatization will increase foreign investment when
foreigners will purchase them. Their production will increase which will more foreign exchange for
Pakistan and if these enterprises are set up by foreign loans, these loans will be repaid out of the sale
proceeds, which will reduce the burden of foreign loans.
3. Broaden the Base of Share Capital and Stock Market Sale of enterprises through stock exchanges will
broaden the base of share capital hence stock market will develop, because general public will be in
position to purchase their shares and investment opportunities for general public will increase.
4. Decrease in Political Pressure There are always political pressures on Govt. owned industries, banks
and other institutions for employment of political workers and loan facilities from banks. When these
enterprises will go in the hands of private owners then these illegal pressures will be reduced to a great
extent.
5. Use of Latest Technology and Know-How Private domestic investors and foreign investors will adopt
latest technology and know-how for the increase in output and their profits. This will result in the increase
in national product, thus national income of the country will grow.
6. Decrease in Deficit Budgeting and Increase in Infrastructure Govt. enterprises usually run into losses
and to keep them going. Govt. provides funds every year. After privation, Govt. need not to resort to
deficit financing and the funds provided to these enterprises will be utilized for construction of social
infrastructure of the economy.

Disadvantages of Privatization.
1. Increase in Tax Evasion Private sector generally tries to avoid payment of taxes. Thus privatization of
enterprises will result in the decrease of tax income.
2. Concentration of Wealth Privatization of large industrial units and services sector such as banks and
insurance companies will increase concentration of wealth in private hands. It means only rich people will
reap the fruits of industrialization and the society will be divided between "haves and have-nots".
3. Exploitation by Private Sector Privatization will result in exploitation by rich people. They may charge
more prices for their goods and services. They may terminate workers to reduce cost of production. Thus
different types of exploitation may be started and the concept of welfare state for Pakistan will be
jeopardized.
4. National Security Endangered Telecommunication, Civil Aviation (Airlines) and railways if privatized
then it would be a security risk for the country.

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Friday, 3 June 2011

SALIENT FEATURES OF PAKISTAN BUDGET 2011-12

SALES TAX & FEDERAL EXCISE BUDGETARY
MEASURES (FY 2011-12)

o The budgetary measures pertaining to Sales Tax & Federal Excise are primarily
aimed at:
Reduction in the rate of Sales Tax from 17% to 16%.
Reducing overall the scope of federal excise duty and completely
eliminating special excise duty to reduce the burden of multiple taxation.
Enhancing the sales tax revenues by rationalizing exemption regime with
the objective to minimize additional burden on the lower segments of the
society.
Distributing the burden of extra taxation measures on exempt sectors of
the economy.
Enhancing tax incidence on cigarettes in line with international practices.
BRIEF POINTS ON MAJOR FISCAL MEASURES:
RELIEF MEASURES
o Withdrawal of special excise duty to reduce the quantum of taxation on all items
including those used by the middle and lower middle class of population.
Enforced through amendment in Federal Excise Act, 2005 and withdrawal of
SRO 655(I)/2007, dated 29.06.2007, effective from the 1
st
July, 2011.
o Review of federal excise duty regime by reducing the number of goods liable to
federal excise
Enforced through amendment in Table-I of First Schedule to the Federal Excise
Act, 2005, effective from the 1st July, 2011.
o Reduction in the quantum of excise duty on cement and withdrawal of excise
duty on white cement is basically aimed at encouraging construction activity
which will result in adequate increase in employment opportunities.
Enforced through amendment in Table-I of First Schedule to the Federal Excise
Act, 2005, effective from the 1st July, 2011.
o Reduction in the rate of federal excise duty leviable on aerated beverages from
12% to 6% to provide a level playing around vis--vis its substitute like fruit
juices, etc.
Enforced through amendment in Table-I of First Schedule to the Federal Excise
Act, 2005, effective from the 1st July, 2011.
o Federal excise duty levied on services provided by property developers or
promoters to reduce the level of taxation which will in turn reduce the quantum of
taxation on housing sector already subject to levy of Capital Value Tax
Enforced through amendment in Table-II of First Schedule to the Federal Excise
Act, 2005, effective from the 1st July, 2011.
o Exemption on local supply of reclaimed lead to recognized manufacturers of lead
batteries has been proposed to check misuse of the facility whereby taxes are
charged by the suppliers of reclaimed lead but is not deposited into the
exchequer.
Enforced through amendment in SRO 551(I)/2008, dated 11.06.2008, effective
from the 4th June, 2011.
o Immediate full adjustment of sales tax paid on import or local purchase of capital
goods has been allowed to mitigate the cash flow of industrial sector and to
ensure timely and quick adjustment of input tax paid.
Enforced through amendment in section 8B of the Sales Tax Act, 1990 effective
from the 4th June, 2011.
REVENUE MEASURES
o Withdrawal of exemption of sales tax on defence stores at import and local
supply to bring it in line with international best practices
Enforced through amendment in Sixth Schedule to the Sales Tax Act, 1990,
effective from the 4th June, 2011.
o Revision in the upward limit of duty slabs to enhance the burden of Federal
Excise Duty on locally produced Cigarettes.
Enforced through amendment in Table I, of First Schedule to the Federal Excise
Act, 2005, effective from the 4thJune, 2011.
o The exemption regime is being rationalized with objective to reduce its scope
only to selected sectors.
Enforced through amendments in Sixth Schedule to the Sales Tax Act, 1990 and
SRO 551(I)/2008, dated 11.06.2008, effective from the 4th June, 2011.
o The value addition tax levied on commercial importers is being enhanced from
2% to 3%, which is levied and collected at import stage.
Enforced through amendment in Chapter X of Sales Tax Special Procedure
Rules promulgated through SRO 480(I)/2007, dated 9th June, 2007, effective
from the 4th June, 2011.
o Exemption of sales tax on cement/concrete blocks and bricks has been
withdrawn to extend similar treatment in line with other inputs used in the
construction industry
Enforced through amendment in Sixth Schedule to the Sales Tax Act, 1990,
effective from the 4th June, 2011.
o The sales tax leviable on sugar at import and local supply stage has been
withdrawn and federal excise duty @ 8% is being levied on aforesaid stages.
Enforced through amendment in First and Second Schedule to the Federal
Excise Act, 2005, effective from the 4th June, 2011.
o The zero-rating regime has been rationalized to limits its application only to
selected sectors.
Enforced through amendment in SRO 549(I)/2008, dated 11.06.2008 and by
rescinding SRO 1161(I)/2007, dated 03.06.2007 effective from the 4th June,
2011.
o The Federal Excise Duty leviable on filter rods for cigarettes has been rationalize
from Rs.1/- per filter rod to 20% ad val.
Enforced through amendment in Table I of First Schedule to the Federal Excise
Act, 2005, effective from the 4th June, 2011
o The Federal Excise Duty on unmanufactured tobacco is being enhanced from
Rs.5/- per kg to Rs.10/- per kg.
Enforced through amendment in Table I of First Schedule to the Federal Excise
Act, 2005, effective from the 4th June, 2011.
LEGAL AMENDMENTS
1. Proposal to provide for revision of special return filed under section 27 by
amending section 26(3) of the sales tax act, 1990
2. Proposal to insert the word per annum in section 8 of the federal excise act,
2005 to bring it at par with section 34 of the sales tax act, 1990
3. Proposal to bring uniformity in period of recovery of federal excise duty and sales
tax
4. Proposal to remove the redundant words in heading of section 34a of the federal
excise act, 2005
5. Proposal to amend rule 43a to remove anomaly in the rate of federal excise duty
6. Proposal to substitute cigarettes with cigarettes or beverages in section 26 of the
federal excise act, 2005
7. Proposal to substitute cigarettes with cigarettes or beverages in section 27 of the
federal excise act, 2005
8. Proposal to rescind SRO 364(I)/2007, dated 03.05.2007, now redundant due to
withdrawal of federal excise duty on cable operators
9. Proposal to disallow auto revision of sales tax return available under rule 14-a of
the sales tax rules, 2006
10. Proposal to prescribe time limit to decide the case after issuance of show cause
notice
11. Proposal to harmonize section 38 of the federal excise act, 2005 with section 47
a (4) of the sales tax act, 1990.
12. Proposal to harmonize section 47 a(4a) of the sales tax act, 1990 with section 38
of the federal excise act, 2005 .
13. Proposal to harmonize rule 65(3) of the sales tax rules with section 47 a (3) of
the sales tax act, 1990 .
14. Proposal to amend SRO 880(I)/2007, dated 01.09.2007 to include Eclia in s. No.
59 and to include calibrated in s. No. 50
15. Proposal to amend section 21 of the sales tax act, 1990 to empower
commissioner inland revenue to effectively enforce the blacklisting regime
16. Proposal to amend sub-section (1), (3) and (4) of section 30 of the sales tax act,
1990 to include the designation inspector inland revenue as an authority under
the sales tax act, 1990
17. Proposal to amend section 30a of the sales tax act, 1990 and section 29 of the
federal excise act, 2005 to replace the word fbr occurring in the heading and
wherever occurring in the text of by the word inland revenue
18. Proposal to empower officers with designation assistant commissioner and
above to carry out investigative audit under 38b of the sales tax act, 1990
19. Proposal to empower officers inland revenue to reject refunds filed under section
66 of the sales tax act, 1990 where incidence has been passed on to the
consumers
20. Proposal to empower federal board of revenue in terms of section 74 of the sales
tax act, 1990 to condone time limit in time bound cases dealt by authorities
specified in section 30 of the sales tax act, 1990.

SOURCE: THIS EXTRACT HAS BEEN TAKEN FROM THE WEBSITE OF FBR
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SALIENT FEATURES OF PAKISTAN BUDGET 2011-12
INCOME TAX

1. For the welfare of individuals with low income earnings, the basic exemption
limit is proposed to be enhanced from Rs.300,000/- to Rs.350,000/-. However
individual taxpayers whose normal income is between Rs.300,000/- to
Rs.350,000/- shall be required to file return of income and statement, for the
purposes of documentation.
2. In order to encourage enhanced equity financing, and to provide relief to new
corporate industrial undertakings established on or after 1
st
July 2011, with
100% equity financing, a tax credit equal to 100% of tax payable is proposed.
The existing companies may also take benefit under this arrangement if
investment in BMR is financed through their 100% equity, on or after by 1
st
July
2011.
3. The rate of tax deductible on Cash Withdrawals from Banks is proposed to be
reduced to 0.2% from existing 0.3%, for bringing in improvement in the liquidity
position of eligible taxpayers.
4. In order to harmonize the existing tax credits available to individuals for
investment in shares and for premium paid to Insurance Company, the
maximum cumulative limit for both the investments is fixed @ 15% of the
taxable income, with maximum upper limit for investment upto five hundred
thousand.
5. Tax relief is proposed to be provided to withdrawals exceeding Rs.500,000/-
from a Voluntary Pension Fund.
6. For encouraging companies enlistment on stock exchange, the existing tax
credit equal to 5% is proposed to be enhanced to 15%.

7. For the national cause of Broadening of Tax Base and utilization of third party
databases, NTN and CNIC of eligible taxpayers are proposed to be provided
expressly alongwith other particulars, in the withholding tax statements filed by
withholding agents.
8. For the purpose of identification of eligible taxpayers, the requirement of
mandatory filing of return of income by the commercial and Industrial consumers
of electricity with annual billing above one million rupees, is proposed. This
measure will also help in Broadening of Tax Base in the country.
9. In order to discourage the practice of arbitrage by banks for receiving dividends
from Asset Management Companies, the rate of tax on such return is proposed
to be enhanced from 10% to 20%.
10. For encouraging investments made by non-residents in Government Securities,
the withholding tax on profit on debt deductible @ 10% is proposed to be a final
tax. This measure will relieve the non-residents from the statutory requirement
of filing of return of income, and will boost national economy.
11. The withholding tax on profit on debt deductible @ 10% arising from investment
in Government securities by individual is also proposed to be a final tax. This
measure will relieve such taxpayers from the statutory requirement of filing of
return of income, and will also encourage domestic investments in the
Government Securities.
12. After imposition of capital gain tax on Modarba certificates and instruments of
redeemable capital traded at stock exchange through Finance Act 2010, the
0.01% CVT on such instruments is proposed to be withdrawn in order to
encourage their trade.
SOURCE: THIS EXTRACT HAS BEEN TAKEN FROM THE WEBSITE OF FBR
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SALIENT FEATURES OF PAKISTAN BUDGET 2011-12

CUSTOMS BUDGETARY MEASURES 2011-12

Policy Objectives:
Equity in tax system.
Industrial incentives for growth and expansion through reduced cost of raw
materials.
Tariff rationalization to facilitate trade.
Amendments in legal provisions to remove arbitrage and ambiguity.
Export promotion.
1. Relief Measures:
a. Removal of Regulatory duty, particularly on edible items.
b. Reduction of duty to 5% on pharmaceutical raw materials to provide relief
to common man.
2. Incentives to Local Industry:
a. Concession for butyl acetate industry through concession on import of its
raw materials (Sabutol)
b. Incentives for glass industry through concession on its two major raw
materials namely mirror backing paint and waste / scrap of glass.
c. Incentive for CNG compressors manufacturing industry through
concession on its 15 components.
d. Concession in machinery and equipment to incentivize oil exploration
companies.
e. Concession on raw material of audio cassettes.
f. Incentive for hi-tech car audio manufacturing industry through concession
on import of mechanism for car audio system.
g. Corrections in industrial SRO 565(I)/2006 to ensure expeditious clearance.
3. Tariff rationalization:
a. Tariff rationalization on bars, rods and profiles of refined copper and
copper alloy.
b. Corrections in descriptions of PCT codes 2923.9010 and 2930.9060.
c. Creation of separate PCT codes for brass scrap and armoured cash
carrying vehicle.
d. Tariff correction to remove ambiguity in re-import scheme.

4. Legal Changes in Customs Act, 1969:

The following legal changes have been made in the Customs Act, 1969:-
a. Reference to section 32 is deleted from section 15 of the Act to remove arbitrage
and eliminate the possibility of any miscarriage of justice through its misuse.
b. In order to provide incentives to local manufacturers and suppliers of domestic
goods against international tenders, section 21(c) is amended to treat these
supplies as exports. This would entitle supplies against international tenders to
customs duty draw back (rebate).
c. The limitation period under section 32 of the Act is extended upto five years for
taking cognizance of offences relating to short-paid duty and taxes in cases
unearthed during audit.
d. In order to mitigate hardships of persons who have wrongfully deposited duty, the
limitation period for refund under section 33 of the Act will be from the date of
finalization of the case (order / decision / judgment).
e. The grant of transit facility has increased Customs facilitation and allied
operations manifold. In order to provide self-sustaining infrastructure and
services at customs stations and en-route, an enabling provision for collection of
transit fee has been provided under new section 129A in the Customs Act, 1969.
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Saturday, 28 May 2011

Introduction of Auditing
Introduction of Auditing

The word Audit is derived from the Latin word audire, which means to hear. Originally, it was customary
for person responsible for maintenance of accounts go to some impartial and experienced persons,
ordinarily judges who used to hear these accounts and express their opinion about their correctness or
otherwise such persons were known as Auditors. Thus the term auditors mean literally hearer i.e., one
who hears and is used ever since the days when public accounts were accepted and approved on the
basis of hearing the accounts read.

Auditing is an important professional task carrying heavy responsibility and calling for commensurate skill
and judgement. Keeping in view the definitions of various authors we may define the word Auditing as:

Auditing is an examination of the accounting books and the relative documentary evidence so that an
auditor may be able to find out the accuracy of figures and may be able to make report on the balance
sheet and other financial statements that have been prepared from there.
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Friday, 27 May 2011

Definitions of Auditing
Definitions of Audit

It is a bit difficult to give a precise definition of word audit in a word or two, Originally its meaning and use
was confined merely to cash audit and the auditor had to ascertain whether the person responsible for the
maintenance of accounts had properly accounted for all the cash receipts the payment on behalf of his
principle. But the word, audit, had a wide usage and it now means a through scrutiny of the books of
accounts and its ultimate aim is to verify the financial position position disclosed by the balance sheet and
the profit and loss account of a company. The following are the some of the definitions of audit given by
some writers:

Spicier and Pegler

An audit is such an examination of the books, accounts and vouchers of a business as it enable the
auditor to satisfy that the Balance Sheets is properly drawn up, so as to give a true and fair view of the
state of the affairs of the business and whether the profit and loss accounts gives a true and fair view of
the profit or loss for the financial period according to the best of his information and explanations given to
him and as shown by the books, and if not, in what respects he is not satisfied.

Montgomery
Auditing is a systematic examination of the books and records of a business or other organization, in
order to ascertain or verify and report upon the facts regarding its financial operation and the result
thereof.

Lawrence R. Dicksee
An audit is an examination of records undertaken with a view to establishing whether they correctly and
completely reflect the transactions to which they relate. In some circumstances it may be necessary to
ascertain whether the transactions are supported by authority.
F.R.M De Paula
An audit denotes the examination of Balance sheet and profit and loss accounts prepared by others
together with the books, accounts and vouchers relating there to in such a manner that the auditor may
be able to satisfy himself and honestly report that in his opinion, such Balance sheet is properly drawn up
so as to exhibit a true and correct views of the state of affairs of the particular concern according to the
information and explanations given to him and as shown by the books of acconts.

A.W. Hanson
An audit is an examination of such records to establish their reliability and the reliability of statement
drawn from them.

R.B. Bose
Audit may be said to the verification of the accuracy and correctness of the books of accounts by
independent person qualified for the job and not in any way connected with the preparation of such
accounts.

Taylor and Perry

An audit is an investigation by an auditor into the evidence from which the final Revenue Accounts and
Balance sheet or other statement of an organization have been prepared, in order to ascertain that they
present a true and fair view of the summarized transactions for the period under review and of the
financial state of the organization at the ending-date, so enabling the auditor to report thereon