Different Types of Audit
Key Difference: Audits are primarily classified into Internal and Statutory Audit. For conducting an internal audit, the auditor is appointed by the management of the company, whereas for conducting a statutory audit, the statutory auditor is appointed by the shareholders of the company. There are many different types of audits which are covered under internal and statutory audits like financial, operational, integration, etc.
Audit refers to the process of careful examination and verification of the various types of activities and records of an individual or organization. Audit assists in building trust over the person or organization. Audits are of different types depending upon their key focus area. However, broadly audits are divided into two main groups which are Internal and Statutory. Internal auditors are appointed by the management of the organization, whereas statuary auditors are appointed by different authorities like shareholders, etc. Internal audit focuses on the financial and operating matters. Statutory auditor is also known as external auditor. Internal audit report findings are only submitted to the management of the organization, whereas statutory audit report is shared with the shareholders.
Audits can be broadly classified into these types –
Financial Audit – It deals with the assessment and verification of the financial statements of an organization. The aim of this auditing is to ensure that the financial documents are not mishandled and are fair. They must also comply with the accounting principles stablished by that particular organization. It primarily deals with Balance Sheet and Profit and Loss Accounts.
Financial audit evaluates the revenues and expenses. It checks that the reporting or the financial documents are in accord with the concerned law, policies and procedures.
Operational Audit – This type of audit is performed to verify that the resources are being use up in the organization in the best possible manner to fulfill the aim of the organization. These are also sometimes known as performance audits. This type of audit takes ingredients from financial as well as compliance audit. In addition it also aims to identify the operations which have chances for further improvement. It is done in order to improve operational efficiently. It verifies that the activities being perfomedin the company are in the way of meeting predefined management objectives.
Information System Audit – This audit focuses on the organization Information system and its related operations. This is generally done with other types of audits like financial, etc. It evaluated and examines the data from IT systems and evaluates their reliability, especially the ones effecting the financial statements of the organization.
It is known by various names like Information System Audit, technology audit, computer audit, etc. IT looks into the technical operation, data center operation and other application controls.
Compliance Audit – This audit focuses on reviving the level of compliant with policies framed by the organization or external regulatory requirements. It basically verifies the compliance of rules including legislation, regulations, contractual and regulatory requirements. It tries to determine that whether there is any violation of concerned laws and regulations that are effecting the organization. Procedures and rules established by the company plays a significant role in maintaining the smooth functioning of the system, and therefore this audit plays an important rule to find out whether these rules are implemented properly or not.
Integrated Audit – Integrated auditing combines many component primarily financial and operations, also including the aspact of information technology. It focuses on the broader spectrum and therefore is termed as the integrated audit as it is jointly planned by the audit team of financial, operational and IT field. It also looks into the quality and other compliance concerns.
This type of audit is important as it is able to provide a complete picture of concerned risks. It may also be used for determine opportunities to increase the flow of information in IT and process groups. This holistic approach of audit is beneficial for increasing the usage of automated controls.
It is important to mention that main types of audits like financial statements audit, operational audit and the compliance audit are generally conducted by the external auditors.
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