Types of Audits! A Complete Guide

The evolution activity that determines the financial and operational goals of an organisation in order to check whether the organisation is following the rules and regulations, is known as a company audit. Every organisation that has been registered as either a private limited or a public limited, has to audit its account books on an annual basis. The various types of audits have been discussed in  this blog.

Internal Audit

As per the name, an internal audit is the audit of the internal affairs of the company. This audit is done in order to decide whether the internal parts of the organisation are working as per the rules and regulations.

1. Anyone can perform an internal audit, even an employee of the organisation can do it.
2. In an internal audit, the auditors will check whether the company is following proper rules and is complying with all the regulatory standards.

External Audit

External audits can be mandatory for specific organisations as per the requirements of the shareholders.

1. The report of the external audit needs to be shown to all the shareholders and the board of directors.
2. The external audit is performed by an independent professional who possesses the specified qualifications.

External audits can be done either on an annual basis or half yearly basis or quarterly basis. An external audit can also be performed by a third party who is appointed by the organisation.

Financial Audit

Financial audit is quite important for the organisation this is because the shareholders invest their money in the business may need to know whether their money is being used properly by the organisation or not. The shareholders are interested in money because money is the profit for the company and making profit is one of the main aims of the business. A financial audit can be referred to as an audit of the account books of the organisation in order to know whether the organisation is properly maintaining the actual books of accounts and is not hiding any of the facts from the investors.

Information Technology Audit

An information technology audit also known as an IT audit is performed in order to assess the information technology infrastructure of the organisation and to know about the system of the organisation. The information technology audit is performed to inform the shareholders that the information technology structure of the organisation is well managed and up to date and can fulfil the desired goals and objectives.

Statutory Audit

A statutory audit is performed by an organisation in order to check whether the organisation is following all the government regulations or not. This is verified by the external auditor who performs the  external audit and also describes the following listed financial reports:

1. Statements of bank.
2. Number of clients .
3. Earning on Investments .
4. The audit also enhances the trust between the public and the company's shareholders.

Performance Audit

Under performance audit various types of assessments are performed. It is possible that the firm conducts a performance audit in order to evaluate the following objectives:

1. Effectiveness of the program and its results.
2. Internal controls.
3. Compliance with specific requirements. Prospective analysis
4. Operational audits

Operational audits are performed in order to review the activities of an organisation with specific objectives. An auditor analyses the process and system of the organisation and then assesses the operational effectiveness, efficiency and productivity of the organisation.

Employee Benefits Plan Audit

An employee benefit plan audit is performed to analyse and assess the financial statements of the employee benefit plan.

Compliance Audit

A compliance audit is performed in order to check whether the organisation is complying with the standards, rules and requirements of the government. The conditions for the audit are set by the government and an auditor is hired in order to evaluate the organisation's compliance.

Payroll Audit

A payroll audit is performed in order to review the processing of the payrolls and to review the reports of an organisation. Under a payroll audit, the errors of the organisation are identified and the compliance is improved. This also helps in protecting the organisation from any sort of fraud. A payroll audit can be performed either by an internal auditor or by a third party auditor.

Forensic Audit

A forensic audit is performed in order to check the financial records of the company to identify whether there is any sort of illegal finance activity or not. The auditor who is generally a forensic accountant assesses the evidence that may be used in the court or for the resolution of a conflict among the shareholders. An organisation may have to perform a forensic audit in case the individuals are suspicious of some fraud, theft or any sort of inaccuracies in the account balances.

Conclusion

In this blog, we came across the various types of audits like the Internal Audit, External Audit, Financial Audit, Information, Technology Audit, Statutory Audit, Performance Audit, Employee Benefits Plan Audit, Compliance Audit, Payroll Audit, and Forensic Audit.