What is Auditing and types of auditing

What’s auditing how it performs?

Auditing is separate subject of accounting scenarios.  there are two types of audits

-          Internal Audit

-          External Audit

I will explain those audit categories later. I will give definition for auditing.

“In An entity, management is preparing financial statements for a period. As in auditing, review those financial statements according to accounting standards and statutory regulations. After the review give an opinion for the review.

Objectives of auditing

There are two types of objectives.

-          Main purpose of auditing is “Give an opinion on Financial Statements”.

Other Purposes Are

-          Reveal fraud and error and correct them

-          Improve the efficiency of internal control of the company.

Benefits of Auditing

-          Improve the efficiency and productivity of the internal control.

-          Can obtain professional guidelines from auditors.

-          More reliability on tax activities.

-          More reliability on Bank loan Approvals.

-          More reliability on investment approvals.

-          Grow the good will

-          Weakness can identify through ML(Management Letters)

Audited financial statements are very acceptable; those statements are accepted by law institutions, Banks, Financial companies, tax departments.

Types of Auditing

  

                                                                                                                   

Nature                                                                                                         Time

Personal Audit                                                                                       Continues Auditing   

Statutory audit                                                                                       Interim Auditing

Internal Audit                                                                                         Final Audit   

Management Audit

                                                              

 Types of Auditing (Rest)

By Nature

Statutory audit

This audit is based on act approved from parliament or any other government institutes its called statutory audit.

Private Audit

This is not a compulsory audit, owner of the company do an audit due to personal satisfaction.

Ex - Sole Enterprise and Partnership Enterprise.

Internal Audit

Evaluate the internal control introduced by management, and report weakness and strengthens to management.

Management Audit

Evaluate management decisions and reporting audit.

By Approach

Vouching Audit

This audit called “every transaction audit”. Observe the every transaction with related documents.

Ex – check Voucher under that

-          Authorize by

-          Correct Classification

-          Post to accounting books

-          Post to correct general ledger.

System Audit

 Audit Based on procedures of a company. Auditors look the procedures and evaluate it, whether they are economically and effectively.   

BY Work Done

Comprehensive Audit

This audit not based for only financial factors but also management, law, usage of resources.

Complete Audit

 This audit performed all areas in entrepreneur. It says that all the areas cover, in normally this audit performed by most of the auditors. 

BY TIME

Continues Auditing

If an auditor perform audit all over the tear called continues auditing. If there are more transactions and more risky areas this type of audits performed.

Interim Auditing

Auditors come by 3 months, 6months, and perform the audit that’s called Interim audit. Most of the financial Companies do this.

Final Auditing

After the all ledger balances balanced and prepared the financial statements, this audit going to be commenced. This audit is special thing what it says that these audited financial statements include in annual reports.