ter.
The word audit is derived from a Latin word audire
which means to hear.[3][4] During the medieval times
when manual book-keeping was prevalent, auditors in
Britain used to hear the accounts read out for them and
checked that the organisations personnel were not negligent or fraudulent.[5]
1 Auditing Australia
ACCOUNTING
There are also new types of integrated auditing becoming available that use unied compliance material (see the
unied compliance section in Regulatory compliance).
Due to the increasing number of regulations and need
for operational transparency, organizations are adopting
risk-based audits that can cover multiple regulations and
standards from a single audit event. This is a very new
but necessary approach in some sectors to ensure that all
Financial audits are performed to ascertain the validity the necessary governance requirements can be met withand reliability of information, as well as to provide an out duplicating eort from both audit and audit hosting
assessment of a systems internal control. As a result of resources.
this, a third party can express an opinion of the person
/ organisation / system (etc.) in question. The opinion
given on nancial statements will depends on the audit 3.2 Assessments
evidence obtained.
The purpose of an assessment is to measure something
Due to constraints, an audit seeks to provide only reason- or calculate a value for it. Although the process of proable assurance that the statements are free from material ducing an assessment may involve an audit by an indeerror. Hence, statistical sampling is often adopted in au- pendent professional, its purpose is to provide a measuredits. In the case of nancial audits, a set of nancial state- ment rather than to express an opinion about the fairness
ments are said to be true and fair when they are free of of statements or quality of performance.[9]
material misstatements a concept inuenced by both
quantitative (numerical) and qualitative factors. But recently, the argument that auditing should go beyond just 3.3 Auditors
true and fair is gaining momentum.[6] And the US Public
Company Accounting Oversight Board has come out with Auditors of nancial statements & non-nancial informaa concept release on the same.[7]
tion (including compliance audit) can be classied into
Cost accounting is a process for verifying the cost of man- three categories:
Due to strong incentives (including taxation, misselling
and other forms of fraud) to misstate nancial information, auditing has become a legal requirement for many
entities who have the power to exploit nancial information for personal gain. Traditionally, audits were mainly
associated with gaining information about nancial systems and the nancial records of a company or a business.
ufacturing or producing of any article, on the basis of accounts measuring the use of material, labor or other items
of cost. In simple words, the term, cost audit means a
systematic and accurate verication of the cost accounts
and records, and checking for adherence to the cost accounting objectives. According to the Institute of Cost
and Management Accountants of Pakistan, a cost audit
is an examination of cost accounting records and veri-
External auditor / Statutory auditor is an independent rm engaged by the client subject to the audit, to express an opinion on whether the companys
nancial statements are free of material misstatements, whether due to fraud or error. For publicly
traded companies, external auditors may also be required to express an opinion over the eectiveness
3.3
Auditors
of internal controls over nancial reporting. External auditors may also be engaged to perform other
agreed-upon procedures, related or unrelated to nancial statements. Most importantly, external auditors, though engaged and paid by the company being
audited, should be regarded as independent
Cost auditor / Statutory Cost auditor is an independent rm engaged by the client subject to the Cost
audit, to express an opinion on whether the companys Cost statements and Cost Sheet are free of
material misstatements, whether due to fraud or error. For publicly traded companies, external auditors may also be required to express an opinion over
the eectiveness of internal controls over Cost reporting. These are Specialised Persons called Cost
Accountants in India & CMA globally either Cost &
Management Accountants or Certied Management
Accountants.
Further information: Cost auditing
Government Auditors review the nances and practices of federal agencies. These auditors report
their nds to congress, which uses them to create
and manage polices and budgets. Government auditors work for the U.S. Government Accountability Oce, and most state governments have similar
departments to audit state and municipal agencies.
Further information: Internal auditors
Secretarial auditor / Statutory Secretarial auditor is
an independent rm engaged by the client subject to
the audit of Secretarial & applicable laws / Compliances of other applicable laws, to express an opinion
on whether the companys Secretarial records and
Compliance of applicable laws are free of material
misstatements, whether due to fraud or error and
inviting heavy nes or penalties. For Bigger Public companies, external Secretarial auditors may also
be required to express an opinion over the eectiveness of internal controls over compliances system
management of the Company. These are Specialized Persons called Company Secretaries in India
who are the members of Institute of Company Secretaries of India and holding Certicate of Practice.
(http://www.icsi.edu/)
The most commonly used external audit standards are the
US GAAS of the American Institute of Certied Public
Accountants; and the ISA International Standards on Auditing developed by the International Auditing and Assurance Standard
Internal auditors are employed by the organisations
they audit. They work for government agencies (federal, state and local); for publicly traded companies; and for non-prot companies across all industries. The internationally recognised standard setting body for the profession is the Institute of Internal Auditors - IIA (www.theiia.org). The IIA has
3
dened internal auditing as follows: Internal auditing is an independent, objective assurance and
consulting activity designed to add value and improve an organisations operations. It helps an organisation accomplish its objectives by bringing a
systematic, disciplined approach to evaluate and improve the eectiveness of risk management, control,
and governance processes.[10] Thus professional internal auditors provide independent and objective
audit and consulting services focused on evaluating
whether the board of directors, shareholders, stakeholders, and corporate executives have reasonable
assurance that the organizations governance, risk
management, and control processes are designed
adequately and function eectively. Internal audit
professionals (Certied Internal Auditors - CIAs)
are governed by the international professional standards and code of conduct of the Institute of Internal Auditors.[11] While internal auditors are not
independent of the companies that employ them,
independence and objectivity are a cornerstone of
the IIA professional standards; and are discussed at
length in the standards and the supporting practice
guides and practice advisories. Professional internal
auditors are mandated by the IIA standards to be independent of the business activities they audit. This
independence and objectivity are achieved through
the organizational placement and reporting lines of
the internal audit department. Internal auditors of
publicly traded companies in the United States are
required to report functionally to the board of directors directly, or a sub-committee of the board of
directors (typically the audit committee), and not to
management except for administrative purposes. As
described often in the professional literature for the
practice of internal auditing (such as Internal Auditor, the journal of the IIA) -,[12] or other similar
and generally recognized frameworks for management control when evaluating an entitys governance
and control practices; and apply COSOs Enterprise Risk Management-Integrated Framework or
other similar and generally recognized frameworks
for entity-wide risk management when evaluating
an organizations entity-wide risk management practices. Professional internal auditors also use Control
Self-Assessment (CSA) as an eective process for
performing their work.
Consultant auditors are external personnel contracted by the rm to perform an audit following
the rms auditing standards. This diers from
the external auditor, who follows their own auditing standards. The level of independence is therefore somewhere between the internal auditor and
the external auditor. The consultant auditor may
work independently, or as part of the audit team that
includes internal auditors. Consultant auditors are
used when the rm lacks sucient expertise to audit certain areas, or simply for sta augmentation
8 OPERATIONS AUDIT
when sta are not available.
Performance audits
Regular Health Check Audits: The aim of a regular health check audit is to understand the current
state of a project in order to increase project success.
Regulatory Audits: The aim of a regulatory audit is
to verify that a project is compliant with regulations
and standards. Best practices of NEMEA Compliance Centre describe that, the regulatory audit must
be accurate, objective, and independent while providing oversight and assurance to the organisation.
Project management[14]
Forensic audits
11 References
10
See also
Academic audit
Accounting
Big Four auditors
Clinical audit
Comptroller,
Comptroller
General,
Comptroller General of the United States
and
Continuous auditing
COSO framework, Risk management
EarthCheck
Financial audit, External auditor, Certied Public
Accountant (CPA), and Audit risk
Independent review
Internal audit
Value for Money Audit
Audit Plan
INTOSAI (International Organization of Supreme
Audit Institutions)
Lead Auditor, under the Chief Audit Executive, or
Director of Audit
Quality audit
Cost audit
Technical audit
Management audit
Operational audit
Risk based audit
12 FURTHER READING
12
Further reading
13
13.1
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13.2
Images
13.3
Content license