Auditing is defined as the process of assessing an organization's compliance with financial, operational, and strategic goals and regulatory requirements. There are several types of auditing, including internal auditing conducted by an organization's employees, and external auditing by independent third parties. Financial, strategic, operational, and IT audits also take place. The principles of auditing include integrity, independence, objectivity, confidentiality, skill and competence, documentation, planning, evidence collection, and reporting conclusions. Auditing provides benefits such as assurance to owners and identifying errors and fraud. However, it also has disadvantages like cost and taking up time.

1. Auditing Fundamentals II For 2ND
Level
Open Educational Resources for
Auditing

2. Auditing Outcomes:
• To understand the definition of audit,
• Types of auditing,
• The principles of auditing,
• The benefits and
• Disadvantages of auditing.
Open Educational Resources for
Auditing - Outcomes

3. What is Auditing?
Open Educational Resources for
Auditing - Definition
Auditing is the process of assessment and ascertaining of
financial, operational, and strategic goals and processes in
organizations to determine whether they are in compliance
with the stated principles in addition to them being in
conformity with organizational and more importantly,
regulatory requirements, as mentioned by Juneja (2015).

4. Types of Auditing:
• Internal Auditing - the audits done by employees and
stakeholders within the organizations with a view to evaluate
and assess whether the organization is following the internal
processes, norms, rules, and regulations.
• External Auditing - are done by independent and third party
agencies and companies that are especially tasked with
assessing and evaluating an organizations’ compliance with
the regulatory norms, stated by Rajput (2019).
Open Educational Resources for
Auditing - Types

5. • Financial Auditing - are the most common form of audits for
various reasons including the fact that businesses exist to
make money and return profits and generate wealth for their
shareholders.
• Strategic, Operational and IT Auditing - IT infrastructure
and the fast paced external marketplace which needs an
evaluation of whether the organizations are aligning their
internal processes and strategies with that of the external
strategic drivers and imperatives. IT audits are being sought to
assess and evaluate the readiness of the organizations’ IT
infrastructure and systems and IT processes to meet the stated
goals and objectives in addition to being able to withstand IT
risks and security breaches, as mentioned byJuneja (2015).
Open Educational Resources for
Auditing – Types Continues…

6. Principles of auditing
• Integrity, Independence and Objectivity - the auditor has to be honest
while auditing, he cannot be favouring the organization.
• Confidentiality - the auditor has access to a lot of sensitive financial
information of the organization.
• Skill & Competence - the auditor must be experienced and trained in
the procedures of auditing.
• Documentation - in most cases the auditor maintains an audit
notebook, an audit plan and auditing file.
• Planning - An audit plan allows the auditor t plan out his work and
enables him to be more efficient and timely.
• Audit Evidence - the auditor must collect enough evidence to support
his final opinion.
• Audit Conclusions and Reporting - after the auditor collects all
evidence he must now form his opinion on the basis of the following
criteria, all relevant accounting standards were applied at all times, as
discussed by Firdausi, A., Shaik, N. and Tiwanri, G.
Open Educational Resources for
Auditing - Principles

7. Auditing benefits
• Assurance to the Owners
One of the biggest advantages
of auditing is that it offers
assurances to the owners,
investors, shareholders.
• Errors and Frauds
An error is something that is
done without the intention to
fraud the company, it is an
innocent mistake. Fraud, on the
other hand, is deliberate.
• Independency
If the auditor is an external
auditor, the business can get a
second opinion on their
financial statements and their
financial standing as well.
Open Educational Resources for
Auditing – Benefits & Disadvantages
Auditing disadvantages
• Cost Factor
A very thorough and detailed
audit would be a costly affair.
• Time Factor
Auditors generally work on a
very specific timeline.
• Inconclusive Evidence
Generally, the audit evidence
the auditor collects is
persuasive in nature, not
conclusive in nature, as
discussed by Firdausi, A.,
Shaik, N. and Tiwanri, G.

8. Firdausi, A., Shaik, N. and Tiwanri, G. Advantages and Limitations of
Auditing. [Online]. Available from:
https://www.toppr.com/guides/accounting-and-auditing/concept-of-
auditing/advantages-and-limitations-of-auditing/
Firdausi, A., Shaik, N. and Tiwanri, G. Basic Principles Governing an
Audit. [Online]. Available from:
https://www.toppr.com/guides/accounting-and-auditing/concept-of-
auditing/basic-principles-governing-an-audit/
Fresh Books Cloud Accounting. [Online]. Available from:
https://www.freshbooks.com/hub/accounting/what-is-auditing
Juneja, P (2015). What is Auditing, Its Types, Purposes, and Some
Current Issues. [Online]. Available from:
https://www.managementstudyguide.com/what-is-auditing-its-types-
and-purposes.htm [Accessed: 05 July 2015].
Rajput, D (2019). Accounting and Auditing UGC-NET-Commerce New
Edition. America
Open Educational Resources for
Auditing - References