Introduction to Auditing Flashcards
Auditing deals solely with the financial statements of an organization?
False, Audits often focus on the financial records of an organization but can also study systems, processes, products and other aspects of a business
Which are the benefits of an audit for the organization?
- Assess employee efficiency
- Uncover and prevent fraud
- Confidently use information
- Identify risks
- Determine causes of fluctuations
- Be listed on national stock exchange
Benefits of an audit for the organization
- Assess employee efficiency
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Benefits of an audit for the organization
- Uncover and prevent fraud
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Benefits of an audit for the organization
- Confidently use information
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Benefits of an audit for the organization
- Identify risks
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Benefits of an audit for the organization
- Determine causes of fluctuations
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Benefits of an audit for the organization
- Be listed on national stock exchange
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Summary of the objectives and benefits of auditing
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What are the four types of audits?
- Financial
- Operational
- Compliance
- Statutory
What is a Financial Audit?
it is a comprehensive review of an organization’s financial records. Its purpose is to find any inacurate or missing pieces of information known as material misstatements.
Objectives:
- Check and improve accuracy of financial statements
- Correct and eliminate material misstatements found in records
- Financial records are evaluated by a qualified auditor
- Material misstatements are located and corrected, and suggestions for how to prevent future errors may be suggested
How it is done
- Financial records are evaluated by a qualified auditor
- Material misstatements are located and corrected, and suggestions for how to prevent future errors may be suggested
What is an Operational Audit?
An operations Audit examines the effectiveness of an organization’s internal systems. these might include a company’s communications systems and production processes. Operational policies and how they meet organizational goals are also examined.
Objectvies:
- Increase efficiency and reduce waste
- The company’s internal systems and procedures are tested for efficiency and effectiveness
- Inefficient use of resources or capital are located and suggestions for improvement are made
- Cost allocation processes are reviewed
How it is done:
- The company’s internal systems and procedures are tested for efficiency and effectiveness
- Inefficient use of resources or capital are located and suggestions for improvement are made
- Cost allocation processes are reviewed
What is a Compliance Audit?
A compliance audit reviews if, and to what degree, an organization observes regulatory guidelines.
Objectives:
- Ensure the organization is in compliance with regulatory guidelines, whether internally-developed or government imposed
- Ensure information technology security policies are effective and being enforced
- The organization’s compliance with internally or externally imposed regulations is evaluated
- Auditors review security policies related to the protection of sensitive information
How it is done:
- The organization’s compliance with internally or externally imposed regulations is evaluated
- Auditors review security policies related to the protection of sensitive information
What is an Statutory Audit?
An Statutory Audit serves the same purpose as a financial audit - that i, it ensures that the organization is keeping fair and accurate financial records. The difference, howecer, is that a statutory audit is legally required. For this reason, statutory audits are conducted by external auditors.
Objectives:
- Determine whether organization is providing a fair and accurate representation of its financial position
- Legally required audit is performed by an external auditor
- Evaluate whether the organization is providing a fair and accurate representation of its financial position
How it is done:
- Legally required audit is performed by an external auditor
- Evaluate whether the organization is providing a fair and accurate representation of its financial position
What is an Internal Audit?
Internal audits mainly serve the needs of the organization. While internal auditors are employees of the organization, they perform a fuction that’s independent from its other departments.
Objectives:
- To produce an audit report that can be used internally to improve efficiency
- Cover a broad range of risks facing the organization
- Help the organization achieve its business objectives
- Performed by auditors who are employed by the organization, but operate independently from other departments
- Consider risks facing the organization and what is being done to manage those risks
How it is done:
- Performed by auditors who are employed by the organization, but operate independently from other departments
- Consider risks facing the organization and what is being done to manage those risks
