2. Audits are performed to ascertain the validity and reliability of information; also to provide
an assessment of a system's internal control. The goal of an audit is to express an opinion of
the person / organization / system (etc.) in question, under evaluation based on work done
on a test basis.
3. • The role of auditor goes back many hundreds of years. These are records from
ancient Egypt and Rome, showing that people were employed to review work done
by taxes collector and estate managers.
• The emphasis was very much on the detection of fraud and other irregularities.
• Emphasis has changed and the role of the auditor becomes much more
sophisticated.
4. BASIC TYPES OF AUDIT
• FINANCIAL AUDIT:
Address questions of accounting, recording, and reporting of financial transactions. Reviewing
the adequacy of internal controls also falls within the scope of financial audits.
• NON FINANCIAL AUDIT:
It is non statutory one and serves two purposes
• It checks company’s compliance to standards
• It determines whether a product or service satisfy the customer’s demands in terms of quality and
features.
5. DIFFERENT CATEGORIZATION OF AUDIT
Statutory Audit
Privates Audit
Internal Audit
Management Audit
IT Audit
6. • STATUTORY AUDIT
A legally required review of the accuracy of a company's or government's financial records. The
purpose of a statutory audit to determine whether an organization is providing a fair and
accurate representation of its financial position by examining information such as bank balances,
bookkeeping records and financial transactions.
• PRIVATE AUDIT
When the audit is not a statutory requirement , but is conducted at the desire of
owners , such an audit is private audit . The audit is conducted primarily for their
own interest. At times the private audit may become a requirement under tax laws , if
the turnover exceeds a specified limit.
7. • INTERNAL AUDIT
The examination, monitoring and analysis of activities related to a company's
operation, including its business structure, employee behavior and information
systems.
MANAGEMENT AUDIT
Analysis and assessment of competencies and capabilities of a company's
management in order to evaluate their effectiveness, especially with regard to the
strategic objectives and policies of the business. The objective of a management audit
is not to appraise individual executive performance, but to evaluate the management
team in relation to their competition.
8. INFORMATION SYSTEM AUDIT
Address the internal control environment of automated information processing systems and
how these systems are used. IS audits typically evaluate system input, output and
processing controls, backup and recovery plans, and system security, as well as computer
facility reviews.
IA’s scope of work is comprehensive and considers all aspects of the organization - both
financial and non-financial - with an emphasis on constructive improvement.
9. • The audit process is similar for most engagements and normally consists of four
stages: Planning (sometimes called Survey or Preliminary Review), Fieldwork, Audit
Report, and Follow-up Review. Client involvement is critical at each stage of the audit
process. As in any special project, an audit results in a certain amount of time being
diverted from your department's usual routine. One of the key objectives is to
minimize this time and avoid disrupting ongoing activities
10. • Announcement Letter: The client is informed of the audit through an
announcement or engagement letter from the Internal Audit Director.
• Initial Meeting: the client describes the unit or system to be reviewed, the
organization, available resources (personnel, facilities, equipment, funds), and
other relevant information.
• Preliminary Survey: In this phase the auditor gathers relevant information about
the unit in order to obtain a general overview of operations.
• Internal Control Review: The auditor will review the unit's internal control
structure, a process which is usually time-consuming.
11. AUDIT PROCESS
• STAFFING THE AUDIT TEAM
• CREATING AN AUDIT PROJECT PLAN
• LAYING THE GROUNDWORK FOR AUDIT
• ANALYZING AUDIT RESULTS
• SHARING AUDIT RESULTS
• WRITING AUDIT RESULTS
• DEALING WITH RESISTANCE TO AUDIT RECOMMENDATIONS
• BUILDING AN ONGOING AUDIT PROGRAMS.
12. OBJECTIVE OF AUDIT
• PRIMARY OBJECTIVE:
To produce a report by the auditor of his opinion of the truth and fairness of financial statements
so that any person reading and using them can belief in them.
• SECONDARYOBJECTIVE:
• To detect Error and Fraud
• To prevent Errors and fraud by the deterrent and moral effects of Audit
13. • Preparation of the audit program concludes the preliminary review phase. This
program outlines the fieldwork necessary to achieve the audit objectives.
