AUDIT

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.
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The general definition of an audit is an 
evaluation of a person, organization,
system, process, enterprise, project or
product. The term most commonly
refers to audits in accounting, but
similar concepts also exist in project
management, quality management,
water management, and energy
conservation.
HISTORICAL BACKGROUND
•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.

 Basic Type of Audit

Audits can be categorized in to two types:

 Financial audit

 Non financial audit

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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

1. It checks company’s compliance to standards.

2. It determines whether a product or service satisfy the
customer’s demands in terms of quality and features.
 DIFFERENT
CATEGORIZATION OF AUDIT
Statutory Audit
Privates Audit

Internal Audit

Management Audit

IT Audit
 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
For Example,
a state law may require all municipalities to submit to an annual
statutory audit examining all accounts and financial transactions
and to make the results of the audit available to the public. The
purpose of such an audit is to hold the government accountable
for how it is spending taxpayers' money.
 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.
Private Audit is following types
1 audit of sole proprietorship
2 audit of partnership firms
3 audit of individuals accounts 
4 audit institutions not covered by statutory audit
 Internal Audit
The examination, monitoring and analysis of activities
related to a company's operation, including its business
structure, employee behavior and information systems.

Internal audit found to play the following roles-

 Check weather existing controls are effective and
adequate.
 Weather financial and other reports show the actual
results of the company
 Weather subunits are following the policies and
procedures laid down by the company.
 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.
 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.
 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.
OBJECTIVE OF AUDITING
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 believe in
them.

Secondary Objective:
To detect Error and Fraud.

To prevent Errors and fraud by the deterrent and

moral effects of Audit