Types Of Auditing – Audit is an art of systematic and independent review and investigation on Financial Statements, Management Account, Management Reports, Accounting Records, Operational Report, Revenues Report, and Expenses Report, etc. The result of the review and investigation will be reported to shareholders of the entity.
Audit reports sometime submit to other stakeholders like government, bank, creditors or public. The audit is classified into many different types and level of assurance. According to the objective, scope, purposes and the ways how an audit is performed.
Similarly the performance of an audit normally in accordance with ISA as well as other local audit standards. There are many types of audit including financial audit, operational audit, statutory audit, compliance audit and so on. There are a number of types of audits that can be conducted, including the following:
- Compliance audit: This is an examination of the policies and procedures of an entity or department, to see if it is in compliance with internal or regulatory standards. This audit is most commonly used in regulated industries or educational institutions.
- Construction audit: This is an analysis of the costs incurred for a specific construction project. Activities may include an analysis of the contracts granted to contractors, prices paid, overhead costs allowed for reimbursement. Even change orders, and the timeliness of completion. The intent is to ensure that the costs incurred for a project were reasonable.
- Financial audit: This is an analysis of the fairness of the information contained within an entity’s financial statements. It is conducted by a CPA firm, which is independent of the entity under review. This is the most commonly conducted type of audit.
- Information systems audit: Types Of Auditing – this involves a review of the controls over software development, data processing, and access to computer systems. The intent is to spot any issues that could impair the ability of IT systems. Similarly to provide accurate information to users. As well as to ensure that unauthorized parties do not have access to the data.
- Investigative audit: This is an investigation of a specific area or individual when there is a suspicion of inappropriate or fraudulent activity. The intent is to locate and remedy control breaches. As well as to collect evidence in case charges are to be brought against someone.
- Operational audit: This is a detailed analysis of the goals, planning processes, procedures, and results of the operations of a business. The audit may be conducted internally or by an external entity. The intended result is an evaluation of operations, likely with recommendations for improvement.
- Tax audit: This is an analysis of the tax returns submitted by an individual or business entity, to see if the tax information and any resulting income tax payment is valid. These audits are usually targeted at returns. That result in excessively low tax payments, to see if an additional assessment can be made.
- External Audit: External audit is types of audit services that audit firm provide Assurance Services, Consultant Services, Tax Services, Legal Service, Financial Advisory, and Risk Management Advisory. The best example of external audits is KPMG, PWC, EY and Deloitte.
External auditors could be individual or audit firms. These kind of firms are sometimes calling CPA firms. As they required to hold CPA qualification to run audit firm and sign audit reports.
This type of audit required to maintain a professional code of ethics and strictly follow international audit standard or local standards as required by local law.
- Internal Audit: Internal audit refers to people or department that working in the company to perform internal audit activities as determined by the audit committee or board of directors. Internal audit is employed by the company but it is independence from the operation and not reporting to executive management.
Scope of internal audit is generally determined by the audit committee or board of directors. And if there is no audit committee and board of directors. Internal audit normally reports to the owner of the company.
- Statutory Audit: Types Of Auditing – Statutory audit refer to the audit of financial statements for specific or type of entities that required by law or local authority. For example, all banking sectors required their financial statements to be audited by qualified audit firms approved by their central bank.
The statutory audit might be the difference from the financial audit as a financial audit refers to the audit of all types of entity’s financial statements including both meet or not meet the government requirement.