Auditing is the process of conducting an investigation in order to give an opinion regarding the state of affairs of the matter under consideration. Though most people may identify auditing as a process of checking the financial statements of a company, this is simply one type of audit. There are many different types of audit; a few are given below.
This is the most common type of audit and as aforementioned, it is the process of checking the financial statements of a business in order to give an opinion on whether they present a true and fair view of the organization. Financial audits are usually conducted on a yearly basis and they are mandatory by law for most companies. Auditors would usually examine the books of accounts and work with the qualified accountants of the company being audited in order to make their opinion.
An environmental audit is conducted to ascertain the extent to which an organization is complying with environmental laws and the impact of the organization’s operations on the environment. These are usually not mandatory audits but are conducted by organizations which like to demonstrate their concern for the environment and/or where the stakeholders of the organization consider environmental-friendliness to be of importance. Environmental audits are usually conducted by qualified environmental auditors.
Value for Money (VFM) Audit
A value for money audit is an audit to ascertain the economy, efficiency and effectiveness of an operation. This type of audit can be employed not only by commercial organizations, but by non-profit organizations as well. Governments use VFM audits to ascertain the economy, efficiency and effectiveness in the use of public funds.
A quality audit aims to ascertain the extent to which an organization complies with quality standards and to ascertain the quality of their output. Such audits are usually of prime importance to large organizations for which the reputational or other consequences of poor quality output would be severe. Manufacturers of high-risk products, such as airplane manufacturers, would consider quality to be a top priority as the consequences of product failure due to low quality would have severe consequences and thus, they would conduct regular quality audits.
Performance audits seek to identify the success in achieving the objectives of a project or venture. Such audits are usually conducted after the completion of the project under consideration and may thus be called post-completion audits. The purpose of such audits is to ascertain whether the project was successful in achieving its goals or not and the reasons for such. The results of the audit will help in increasing the success rates of future projects as they help increase organizational learning by identifying areas for improvement.