Different Classification of Audits | Introduce yourself to the Audit Types!

Different Classification of Audits: As one of the fast-growing audit firms in UAE, the Adepts team is here to introduce you below different classification of audits for your business:

  1. Internal audit

Internal audit provides independent assurance that an organisation’s risk management, governance and internal control processes are operating effectively.

Internal auditing aids in improving an organization’s governance, risk management and control processes by providing insights and recommendations based on evaluation and assessment of data and business processes.

  1. Financial statements (External) audit

Financial Statement Audit covers the independent auditor’s opinion on the historical financial information of the company that are prepared by the company’s management. Financial Statement Audit is usually carried out for a statutory purpose and can be conducted only by registered audit and accounting firms.

An audit report enables trust and transparency among stakeholders. Independent audits are essential to maintain investor confidence. There has been an ongoing series of fraudulent reporting by businesses, which can be pointed out by an effective audit before facing any significant business loss.

  1. Review of Financial statements

Review engagement gives a reasonably lesser degree of assurance than an audit. As in a review, the auditor does not perform all audit procedures.

  1. Performance audit

It covers a wide assortment of appraisals. An entity might ask for or require a performance audit to assess objectives like program viability and outcome, compliance with specific requirements/legislation and prospective examination/monitoring.

  1. Operational audit

It encompasses auditing of activities involved in operating cycles of transactions including different departments within an organization. For e.g. procurement cycle, sales/exports, supply chain, inventory management etc. Auditor examine cycles, methods, and frameworks and assess functional adequacy, proficiency, and efficiency.

  1. Employee benefit plan audit

This sort of audit covers the verification of employment benefits calculation in line with applicable employees’ regulatory requirements for employers as well as the requirements of International Financial Reporting Standards.

  1. Audit for component of financial statements

This audit deals with audit of:

  • Single financial statement: including balance sheet, profit and loss account, income or expenditure statement, cash flow statement, or
  • Specific element, account or item of financial statements: including sales, inventory, procurement, fixed assets, financing, explanatory or descriptive disclosure relevant to financial statement or an element, etc.
  1. Compliance audit

A compliance audit deals with the evaluation to confirm whether the entity conforms to regulatory requirements. Compliance audit includes, but is not limited to, Tax Audits which covers the verification of tax liability by the Federal Tax Authority (FTA) to verify whether the tax payable is settled within the due date and whether such liabilities are properly calculated in accordance with the law provisions.

  1. Information system (IS) audit

IS audit assesses the sufficiency and effectiveness of IS controls inside an organization’s Information technology (IT) function/software. If IS controls are not operating effectively or adequate controls are not in place, then an entity is prone to significant errors and fraud in its financial and operating records.

  1. Forensic audit

A forensic audit is an examination and evaluation of financial records to derive evidence that can be used in a legal proceeding. This may encompass the detection and prevention of fraud, terror finance and money laundering.

Also Check —>> Forensic Auditing Dubai

This Audit involves the examination of accounts to ascertain the financial irregularities and to follow the movement of funds and assets in organizations.

The objects of Forensic Auditing include:

  • identification of suspect;
  • determination of damage;
  • quantification of damage;
  • prevention of damage;
  • identification of financial irregularity;
  • tracing of assets embezzlement.

Final Thoughts

We hope you are now aware of the different kinds of auditing. If you would like to conduct any of these audits for your company, Adepts Chartered Accountants welcome you to deal with you auditing concerns through our tailored client specific solutions.

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