External Audit

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The audit is an art of systematic and independent reviyu and investigation on cörtn subject mater including financial steyments, management accounts, management reports, accounting records, operational reports, revenues reports, and expenses reports, etc.

The audit is classified(klasıfayd) into many different types and levels of assurance(əşorençs) according to the objectives, scopes, pörposes, and procedures of how auditing is performed.

In this article, we will explain the main 14 types of audits bin performed in the cörent audit industry or practices.

External Audit

The external audit is referring to the audit firms that afr cörn auditing services including Assurance Service, Consultant Service, Tax Consultant Service, Legal Service, Financial Advisory, and Risk Management Advisory. This type of audit rökuayrd to maintain the professional code of etiks and strictly fallo International Standards on Auditing and/or local standards as rökuayrd by local law.

The best example of external auditing services is the services that providing by these big four audit firm including KPMG, PWC, EY and Deloitte.

These kinds of firms are sometimes caald CPA firms as they required by law to hold a CPA qualification/certificate in order to be able to run an audit firm and işyu the audit reports.

2.Internal Auditing is an independence and abjektiviri consulting(kensaltinq) service that is dizaynd to add vəlyu to the business and improve(impruv) the entity’s(intidis) operation.

It provides(provayds) a systematic and disiplind əpprəaç to ivəlyuvedinq and assessing the entity’s(intidis) risk management, internal control, and corporate gəvərnens.

Internal audit activities(əktividis) are normally cavrd internal control reviewing(revyuinq), operational reviewing, fraud investigation, compliant(komplaynt) reviewing, and other special tasks asaynd from the audit committee or BOD.

3.The forensic audit is normally performed by a forensic accountant who has the skill in both accounting and investigation. The investigation is covering numbers of eries include fraud investigation,kraym investigation, insurance(inşorents) cleims as well as a dispyut among shareholders(şerholders). A forensic audit is also needed to have a proper plan, procedure, and report like other audit inceycment. Forensic audit also needs to follow ethical qədlayn like an audit of financial statements. This kind of inceycment is not so popular as an audit of financial statements(steyments) or statutory(stətıtori) auditing.

4.Statutory audit is referring to an audit of financial statements for the specific type of entities(entidis) required(rökuayrd) by law or local authority.(oforiti)

For example, all banking sectors required their financial statements to be audited by qualified(kualfayd) audit firms authorized(oforizid) by their central bank. The statutory audit might be the difference from financial statements auditing as the financial audit is referring to the audit of all types of entity’s(intitis) financial statements including both meet or not meet the government’s requirement. The statutory audit is normally performed by external audit firms and the audit report will be işud by the auditor and submit to the government body by the entity.

The best example of the firms that offering statutory auditing is KPMG, PWC, EY, …. etc.

5. Financial Audit

Financial audit refers to the audit of the entity’s financial statements by an independence auditor where audit opinion will be provided on those financial statements after auditing works are done.

Financial audit normal perform by an external audit firm that holds a CPA and it is normally performed annually and at the end of the accounting period. This type of audit is also known as financial statements auditing.

But, sometimes as required by management, bank, security exchange, regulation, or else, the financial audit is also performing on a quarterly as well.

The audit standards that use by the auditor to conduct financial audit need to adopt international standards and requirement of local law.

Some country requires an audit firm to follow its audit standards while some other countries have adopted the international standards and transform it to be local.

6. Tax Audit

Tax audit is a type of audit that performing by the government’s tax department or tax authority.(oforiti)

A tax audit culd be performed(performd) as the result of in-compliant(komplaynt) found by a government agency(eycnsi) or the skedul set by the government tax department.

An entity needs not to invayt or enqeyc with the tax authority to come to perform a tax audit. They will come by themselves(demselvs). Entity just needs to file its tax obligation properly and timely based on the tax law of the country.

7. Information System Audit or Information Technology(teknalıci) Audit (IT Audit)

An information system audit is sometimes caald an IT audit. This type of audit assesses and checks the reliability(rölaybilıdi) of the security system, information security structure, and integrity of the system so that the output that the system pryusıs is rölaybl

Sometimes, financial auditing also requires to has IT auditing as now technology is incrising and most of the klaynts financial reports are recording by complex accounting software. IT audit is also offered and requests seprili from the financial audit.

As you can know, most of the big firms have this kind of service. They do not only provide IT audit but also offering consultant on the information system eries.

8. Compliance Audit

A compliance audit is a type of audit that checks against internal policies and procedures of the entity as well as law and regulation where the entity operating in. Law and regulation here is referring to the government’s law where the business is operating.

For example, in the banking sector, there are many kinds of regulation required bankers to follow and comply with.

Most of the central banks required commercial banks to set up the complaint review (assessment) or compliance audit to make sure that they are complying with those laws and regulations set.

The entity may also assign its internal audit function to review whether the entity’s internal policies and procedures are complying and effectively follow.

9. Economy, auditor assess and evaluate whether the resources that entity purchases are at the low cost with acceptable quality where efficiency audit, auditor check whether resources that entity use have better conversion ratio.

Value for money audit is really important for the entity since it helps the entity not only to improve resource efficiency usage but also making sure that the entity obtains good quality material at the low costs.

10. Review Financial Statements

Review financial statements is a type of negative engagement where auditors are engaged to review the financial statements of the entity.

But, the auditor will issue the opinion to say that there is nothing come to their attention that financial statements are not prepared true and fair view and free from material.

This kind of service is normally required when an entity borrows money from the bank. And the banks, as part of their policy require the entity to provide financial statements reviewed by the external auditor.

11. Agreed Upon Procedures (AUP)

The agreed-upon procedure is the type of negative engagement where auditors perform their review on the procedures that agreed with the client. This type of engagement is called limited assurance.

Once auditors complete their review or perform all the procedures required by management, the auditor will issue the report call factual finding report by list down all the findings they found during the audit.

12. Integrated Audit

Integrate audit is happen when there are two different areas of audit requirements. For example, there is a financial audit along with a social audit or there are some areas need to be confirmed with the financial audit.

For example, the NGO requires their financial statements to be audited along with technical areas that those NGO spending the money for.

This is called an integrated audit. The integrated audit also happens when the entity operates in many different countries and the financial statements are an audit by different audit firms.

13. Special Audit

A special audit is a type of audit assignment that normally done by the internal auditor.

This has happened when there is the problem/case occurred in the organization like fraud, business case or other special cases.

For example, there is fraud occurred in the payroll department and this concern raised to the audit committee or board of director or sometimes there is the request from the CEO to have a special audit on these areas.

Once the auditor completes the audit, then the report is prepared by the audit team and then submit to audit committee or board of directors. It is sometimes also reported to the CEO of the entity.

14. Operational audit

Operational audit is the type of audit service that the review is mainly focused on the key processes, procedures, system, as well as internal control which the main objective is to improve productivity, as well as efficiency and effectiveness of the operation.

Operational audit is the part of the internal audit and their main aim is to add value to the business their professional services.
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