This document discusses various types of audits including statutory audit, government audit, private audit, internal audit, external audit, continuous audit, interim audit, balance sheet audit, occasional audit, complete audit, partial audit, cash audit, special audit, operational audit, proprietary audit, efficiency audit, tax audit, management audit, cost audit, social audit, classification audit, bank audit, forensic audit, and human resource audit. It provides definitions and objectives for each type of audit. Key points include that statutory audit is compulsory under law, government audit audits government entities, internal audit is conducted by organization staff, and external audit is an independent examination of financial statements.

1. AUDITING
B. Com II, 2nd Semester
Institute of Commerce
University of Sindh, Jamshoro
Masood Abbas
M. Com,2014
Chapter 02
Classification/Types of Audit

2. Learning Objectives
2.1_Introduction
2.2 _ Classification/Types of Audit

3. Organization structure
Degree of
Independence
Conduct of Audit Specific Objectives
Statutory Audit
Government Audit
Private Audit
Internal Audit
External Audit
Continuous Audit
Interim Audit
Balance Sheet Audit
Occasional Audit
Complete Audit
Partial Audit
Cash Audit
Special Audit
Operational Audit
Proprietary Audit
Efficiency Audit
Tax Audit
Management Audit
Cost Audit
Social Audit
Classification Audit

4. Organization structure
Statutory Audit
Government Audit
Private Audit
Classification Audit
Degree of
Independence
Conduct of Audit Specific Objectives

5. 1.Statutory Audit
•Statutory audit refers to the audit of accounts of a business
enterprises carried out compulsorily under the provisions of a
statute or law.
•It is the audit carried out compulsorily under any statute, any
law.
•It includes the following types:
•Companies governed by Companies Act,2017
•Banking Companies governed by Banking Ordinance,1962
•Co-operative societies registered under Co-operative societies
Act,1925.
•Electric Supply Companies
•Government departments/public utilities.

6. Features of statutory audit
• Statutory audit is compulsory under law.
• Statutory audit is required to be conducted by a
qualified auditor.
• In the case of Statutory audit, the rights, duties and
liabilities of the auditor are governed by the statute
or law applicable to the undertaking.
• Statutory audit is an independent audit.
• Statutory audit is an external audit.
• Statutory audit must be a complete or full audit. It
cannot be partial.

7. 2. Government Audit
• Government audit refers to the audit of accounts of
Government departments and offices, Government
companies and statutory or public corporations.

8. Objectives of Government Audit
• To ensure that all payment has been sanctioned by the
competent authority.
• To ensure that every payments is made as per the rules
and regulations.
• To see that the payments have been made to the right
persons.
• To ensure that the expenditure is not excessive.
• To see that payments are properly classified as capital and
revenue.
• To verify the existence of stocks and stores.
• To ensure that a proper system of stock taking has been
adopted.

9. Government audit may be classified into three types. They are:
 Audit of government departments and offices.
 Audit of Government Companies.
 Audit of Statutory Corporations registered as statutory
corporations

10. Private audit
or Voluntary audit
• Where an audit is not compulsory under any statute, but is
undertaken by the owners voluntarily to get the benefit of
audit, the audit is called private audit.
• In other words, private audit refers to the audit of accounts
of private enterprises such as a sole trading concerns,
partnership firms and other individuals and institutions.

11. • The audit of accounts of sole proprietorship is optional.
• The partnership Act,1932 does not require a partnership firm
to get their financial statements audited.
• In a conventional partnership firm the scope of audit and the
duties of an auditor are determined by the agreement
between partnership firm and the auditor.
Private audit
or Voluntary audit

12. Organization structure
Degree of
Independence
Conduct of Audit Specific Objectives
Internal Audit
External Audit
Classification Audit

13. 1.Internal audit
• Internal audit is a continuous and systematic review of the
accounting, financial and other operations of a concern by
the staff specially appointed for the purpose.
• In other words, it is the audit of accounts by the staff
specially appointed for the purpose.

14. Objectives of Internal Audit
• To ascertain whether internal check and accounting systems
are adequate and effective.
• To ascertain whether predetermined policies, plans and
procedures have been complied with.
• To ascertain the reliability of the accounting and other data.
• To evaluate the performance of the personnel.
• To ascertain whether the properties of the concern are
safeguarded.
• To suggest to the management the improvements desired in
the internal check systems, accounting system etc

15. Features of Internal Audit
• It is generally undertaken by large concerns.
• It is not compulsory.
• The scope of internal audit may vary, depending upon the
nature and size of the concern.
• It may be in addition to external audit.
• It is conducted by the staff of the concern.
• The techniques and methods of auditing employed in
internal audit are the same as those in external audit.
• It is an integral part of internal control.
• The staff engaged in internal audit is appointed by the
management. They are responsible to the management.

16. 2. External Audit
• An external audit is an independent examination of the
financial statements prepared by the organization. It is
usually conducted for statutory purposes (because the law
requires it).

17. Features of External Audit
• External audit is usually conducted by an independent
qualified auditor.
• In the normal course, this type of audit is conducted
periodically.
• The purpose of external audit is to see whether financial
statements give a true and fair view of the financial position
and result of the concern.
• The external auditor can work independently, and enjoys
better status.
• This type of audit is conducted mainly for safeguarding the
interest of owners, shareholders and other parties who don’t
have knowledge of day-to-day operation of the
organization.

18. Organization structure
Degree of
Independence
Conduct of Audit Specific Objectives
Continuous Audit
Interim Audit
Balance Sheet Audit
Occasional Audit
Complete Audit
Partial Audit
Classification Audit

19. • When an audit is conducted at a regular or irregular
intervals throughout the year, it is called continuous audit.
• Continuous audit is one where the auditor’s staff is occupied
continuously on the accounts whole the year.
1.Continuous Audit

20. • It is an audit under which detailed examination of the books
of accounts is conducted continuously throughout the year.
• It is continuous review of the accounts of the organization.
• It is generally applicable to banking company and insurance
company.
1.Continuous Audit
‫آڈٹ‬ ‫مسلسل‬

21. Advantages
• Easy and quick discover of errors and frauds.
• More knowledge technical details .
• Quick presentation of accounts.
• Keep the client staff regular.
• Moral check on the client’s staff.
• Efficient audit due to more time.
• Preparation of interim accounts is very easy.
• Audit staff can be kept busy.
1.Continuous Audit

22. Limitations
• Dislocation of the work of the client staff.
• Expensive.
• Queries may remain outstanding
• Chance for collusion between client staff and audit staff
1.Continuous Audit

23. 2. Final Audit or Annual or Periodical Audit
• Audit at the end of year is known as periodical audit.
• It is an audit carried out after the preparation of financial
statement.
• It is an audit where the auditor takes up his work of checking
the books of accounts only at the end of the accounting year.
• In this case, the audit work is commenced and completed in
a single uninterrupted session.

24. Advantages:
• Cost of audit is less than that of continuous audit.
• Audit work is completed in one continuous sitting.
• Not causing any dislocation of client work.
• No possibility of alteration of figures.
• It is not mechanical and monotonous.
• Less chance for collusion between client staff and audit staff.
2. Final Audit or Annual or Periodical Audit

25. 3.Interim Audit
• An audit which conducted between two annual audits is
known as interim audit.
• In other words, it is the audit conducted in the middle of the
financial year.
• It is carried out for some specific purpose for declaring
interim dividend, ascertaining interim profit.

26. 3.Interim Audit
Advantages
• Quick discovery of errors and frauds.
• Imposes moral check on client staff.
• Helpful for speedup the final audit.
• Useful for publication of interim figures.
• Audit becomes easy and can be completed without lapse of
time.

27. 4.Balance sheet Audit
• Balance sheet audit is a type audit which concentrates
mainly on the verification of the items in the balance sheet
such as capital, reserves, profit and loss account balance,
liabilities and provisions and all the assets of the business.

28. 4.Balance sheet Audit
• Under this type of audit, the audit is commenced from the
balance sheet working back to the books of original entry.
• This type of audit is more popular in USA than in England
and other European countries.

29. 5. Occasional Audit
• An occasional audit is an audit which is conducted once a
while, whenever the need arises.
• In other words, it is a kind of audit which is not conducted on
regular basis, but is conducted for a special event, time or
purpose.

30. 6. Complete Audit
• Complete audit is a kind of audit under which all the records
and books of accounts are audited by an auditor.

31. 7. Partial Audit
• It is a kind of audit the scope of which is limited one.
• It is carried out in respect of only a part of the books of
accounts of a business, for a part of whole of the period.

32. 7. Partial Audit
• The auditor is asked to check a few books. For example, he
may asked to check the payment side of cash book.
• When an auditor is asked to conduct partial audit he, must
make it clear in his report that he has performed partial
audit as per instructions of the client.

33. Organization structure
Degree of
Independence
Conduct of Audit Specific Objectives
Cash Audit
Special Audit
Operational Audit
Proprietary Audit
Efficiency Audit
Tax Audit
Management Audit
Cost Audit
Social Audit
Classification Audit

34. 1.Cash Audit
• It is a type of partial audit which is undertaken for only cash
receipts and cash payment.
• When audit of all items of cash book, is conducted it known
as cash audit.
• The auditor will check the receipt and payments made by
cash with the vouchers and documents.

35. 2. Special Audit
• It is a kind of audit with some special object in view.
• It is a fact finding enquiry.
• Special audits are needed when it is suspected that laws or
regulations have been violated in the financial management
of an organization.

36. 3. Operational Audit
• It is an efficient examination of the various operations of the
different functional area of business, with the objective of
pointing out improvements that will increase its efficiency
and effectiveness.
• Operational audits are usually conducted by the internal
audit staff.

37. 4. Proprietary Audit
• The term propriety means to compare and examine any
specific activity to find out whether it is in public interest ,
is in accordance with commonly
acceptedcustoms and standards of conduct.
• It is an audit in which various actions and decisions are
examined to find out whether in public interest and whether
they meet the standard of conduct.

38. 4. Proprietary Audit
• Instead of too much emphasis on documentation and
vouchers focus should be on substance of the transaction
and looks into the appropriateness thereof on consideration
of public interest, commonly accepted customs, and
standards of conduct.

39. 5. Efficiency/Performance Audit
• It is an evaluation of overall efficiency and performance of
an organization.
• The efficiency audit is based on the economic principles.
• The objective of efficiency audit is to evaluate and compare
the optimum return with the amount of capital invested in
the business and to ensure that investment techniques aim
at giving optimum results.

40. 6. Tax Audit
• A tax audit is an examination of an organization's or
individual's tax return to verify that financial information is
being reported correctly.
• It is a type of forensic audit, performed by the government
appointed auditors, to determine if the appropriate taxes
were paid in full by the entity being audited.

41. 7.Cost Audit
• It is a thorough examination of the cost accounting records
of a company by a cost auditor to ensure that they are
accurate and they also follow to the cost accounting
principles, procedures and plans.

42. Objectives:
• Verifying the accounting entries related in the cost books.
• To find out whether the cost records have been properly
maintained.
• To verify whether the cost accounting principles are complied
with.
• To find out whether the cost statements are properly drawn.
7.Cost Audit

43. Objectives:
• To verify the items of cost expenditure are correctly incurred.
• To find out the efficiency and inefficiency of handling of
material, labor and other expenses.
• To check up the overall working of the cost accountant.
• To reduce the volume of work of the external auditor.
• To detect errors and frauds.
7.Cost Audit

44. 8.Management Audit
• Management audit is defined as periodic assessment of
company's managerial planning, organizing,
actuating/leading, and controlling compared to the norm of
successful operation.
• It is the critical examination, scrutiny and appraisal of plans,
policies, procedures, objectives, means and operational area
of the organization.

45. 8.Management Audit
• It is the audit of managerial actions and decisions.
• It is the audit of activities of various level of the managers.

46. Objectives of Management audit:
• To identify the overall objectives of an organization.
• To pinpoint the deficiencies and defects in functional areas
and suggest remedies for improvement.
• To assist the various level of management in discharge their
duties.
• To help the management in achieving co- ordination among
the various departments.
• To ensure that management objectives are achieved.
8.Management Audit

47. Advantages of Management Audit
• It identifies the overall objectives of the organization.
• It reviews plans, policies, procedures and controls.
• It assesses the performance in each functional area
• It also ascertains the motivational system in operation in the
business.
8.Management Audit

48. 9.Social
Audit

49. 9.Social Audit
• Social audit is a systematic study and evaluation of a
business enterprise’s social performance as distinguished
from its economic performance.
• Social audit is intended to evaluate the social performance
or social contribution of a business organization.

50. Human Resource Audit
• The Human Resources (HR) Audit is a process of examining
policies, procedures, documentation, systems, and practices
with respect to an organization's HR functions.
• The purpose of an HR Audit is to recognize strengths and
identify any needs for improvement in the human resources
function.
Some Other Types of Audit

51. Bank Audit
• In Pakistan audit and accounts of banks are maintained
according the Banking Companies Ordinance 1962.
Some Other Types of Audit

52. Bank Audit
• Bank auditing is the procedure of reviewing the services and
procedures adopted by banks and other financial
institutions.
• It is a routine procedure that all financial services entities
must undergo in order to ensure that they are in compliance
with industry standards and jurisdictional regulations.
Some Other Types of Audit

53. Forensic Audit
• A forensic audit is an examination and evaluation of a firm's
or individual's financial information for use as evidence in
court.
• A forensic audit can be conducted in order to prosecute a
party for fraud, embezzlement or other financial claims.
Some Other Types of Audit