Advance audit

AUDITING

PREETI ROLL NO-8

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.

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 TYPES OF AUDIT• 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• It checks company’s compliance to standards• 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.• PRIVATE AUDITWhen 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.

• INTERNAL AUDIT The examination, monitoring and analysis of activities related to a company's operation, including its business structure, employee behavior and information systems.MANAGEMENT AUDITAnalysis 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 AUDITAddress 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 PLANNING• The audit process is similar for most engagements and normally consists of four stages: Planning (sometimes called Survey or Preliminary Review), Fieldwork, Audit Report, and Follow-up Review. Client involvement is critical at each stage of the audit process. As in any special project, an audit results in a certain amount of time being diverted from your department's usual routine. One of the key objectives is to minimize this time and avoid disrupting ongoing activities

•Announcement Letter: The client is informed of the audit through an announcement or engagement letter from the Internal Audit Director.

• Initial Meeting: the client describes the unit or system to be reviewed, the organization, available resources (personnel, facilities, equipment, funds), and other relevant information. •Preliminary Survey: In this phase the auditor gathers relevant information about the unit in order to obtain a general overview of operations.• Internal Control Review: The auditor will review the unit's internal control structure, a process which is usually time-consuming.

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 AUDIT• 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 belief in them.

• SECONDARY OBJECTIVE:• To detect Error and Fraud• To prevent Errors and fraud by the deterrent and moral

effects of Audit

AUDIT PROGRAM

• Preparation of the audit program concludes the preliminary review phase. This program outlines the fieldwork necessary to achieve the audit objectives.

AUDIT REPORT

•THANK YOU