What are the Types of Audits?

• Internal Audit

This type of audit takes place within the company, where owners take the initiative to get the firm audited by an auditor. The internal auditing process is considered a way to update company board members and shareholders about the finances. It also helps to check and align with the firm’s financial goals. If you conduct an internal audit in your firm, the results can help assess risk management processes and policies, along with analysing the operational process of the company.

External Audit

The external audit process is compulsory for certain organisations according to the requirements and rules set by its shareholders. The report of the external audit is shown to all shareholders during the company’s annual general meeting and Board of Directors meeting.

Certain independent professionals conduct external audits based on the qualifications stated in the rules. Such audits can be commenced half-yearly, quarterly or annually, and results can be used to bring enhancement in business proceedings.

• Performance Audits

This audit is performed within an organisation for various reasons. The main objectives that a firm focuses on when requesting a performance audit are to evaluate internal controls of the company analyse business perspectives, assess different effectiveness and results of the program and conduct operational audits.

In this case, auditors assess the processes and systems of the business to measure its productivity and efficiency towards business goals.

• Compliance Audits

Compliance audits mainly examine the processes and policies of a business or a specific department in the firm. The aim is to check whether the business is compliant with regulatory or internal standards. Such audits are mostly conducted within educational institutions or regulated industries.

• Operational Audits

This auditing process is very similar to an internal audit. Organisations conduct this audit internally, but in some cases, agents are hired externally to complete this procedure. The main aim here is to enhance organisational operations and spot any inefficiencies. Moreover, operational audits analyse the policies, processes, goals and outcomes of functions.

• Statutory Audits

A company conducts statutory audits to check whether it complies with all the policies and regulations stated by the Government. An external auditor verifies these regulations while conducting an external business audit. 

The auditing process results demonstrate different results in the financial report, including bank statements, earnings on investment and total clients. This auditing enhances the trust and transparency among business stakeholders and the public, making it efficient as time passes.

• IRS Tax Audits

This is a type of tax audit that analyses the accuracy of tax returns filed by the business. Here, the auditors look for irregularities in the tax liabilities of the company and make sure the business does not underpay or overpay their taxes. IRS audits are generally conducted randomly by the auditors and are done via in-person interviews or mail.

• Payroll Audit

Payroll auditing systems focus on identifying different errors and improving business compliance to protect it from different frauds. Such audits are either conducted by internal auditors or any third-party auditor hired by the firm. 

• Information System Audit

Such an auditing system helps evaluate different IT risks of a business and understand the systems followed. Different technology-oriented firms use IT audit systems to ensure the security of their data, analyse technology uses, protect systems from hackers and recommend improvement points to the system. Moreover, the reports from this audit guarantee stakeholders that company objectives are met, and business structure stays updated.

• Forensic Audit

Here, the financial records of a business are examined to identify any illegal financial activities. The auditor or a forensic accountant looks for evidence that could be provided in the court and brings resolution to conflicts among stakeholders. It is important to note that forensic audits must be conducted if an individual suspects theft, inaccuracies or fraud in financial balances.