5 Most Common Types Of Business And Organizational Audits

All organizational entities require regular and routine auditing to monitor various functional, procedural, and operational metrics and hence assess the successful achievement of all the set performance goals and objectives. The process of auditing an organization involves the physical onsite inspection, appraisal, and evaluation of various evidential elements by an objective and independent professional in relation to a defined set of operational policies, processes, criteria, and/or frameworks. In the financial world, certified accounting practitioners are tasked with this rigorous task of business auditing by various stakeholders including the business owner(s), clients, legal and regulatory bodies, departmental heads, management committees etc. The auditing process is usually split into four main stages, namely the audit preparation/planning phase, the audit performance/execution stage, reporting, and the follow-up and closing phase. There are 3 main types of audits as indicated below.


Financial Audits


Auditors assess and report on the accuracy and integrity of all financial statements in an organization. Financial audits can be conducted internally or externally. Internal audits are conducted voluntarily by the firm’s in-house accounting department to verify and assure the company that all its internal operational controls and risk management tools are okay as per the set production and financial goals and objectives. External or statutory audits are carried out by an independent accounting organization to verify the actual financial standing of the organization in relation to a specific reporting framework or guidelines. Financial audits are all conducted by certified accounting professionals and they can either focus on certain financial issues in a specific department or on the whole organization. Clifton NJ tax consulting firms are usually hired to conduct tax-related audits to ensure full compliance and tax best practices.


Operational Audit


Generally, auditing activities are usually focused on three main business issues. There is the process audit to check and verify that all performance procedures and operations conform to the defined limits and conditions. A system audit is used to evaluate and confirm that a specific management system fulfils all the required development, execution, an even documentation standards and provisions. And finally we have the production audit, which focuses on the final products or services offered by the company to ensure that they are all in line with the prescribed functional and physical specifications, customer requirements, legal &regulatory standards, and general performance standards. And as discussed above, operational audits are usually conducted internally by an in-house accounting team, and they are all reported as per the requested details and evidence.


Forensic Audits


These are specialized audits that are aimed at investigating and verifying special details regarding specific organizational issues, mostly in cases that are likely to have legal or compliance implications. Forensic audits are usually conducted by independent external auditors with the aim of producing formal reports for legal purposes. They include insurance settlement audits, fraud and other financial crimes investigations, dispute resolutions, professional performance evaluations etc.


Compliance Audit


Compliance audits are conducted to ensure total fulfillment of all the required business laws and regulations. They are usually statutory in nature and they require external auditors to ensure credibility. They are conducted during special business occasions such as during liquidation to audit business value.


Technological, Social And Environmental Audits


Technological audits are used to gauge and report on the nature and suitability of the company’s IT infrastructure. They are used to define and describe the organization’s communication and technological competence relative to the prevailing IT standards. Social and environmental audits are used to examine and state the company’s social and environmental impacts. Organizations are supposed to ensure that their economic activities are sustainable to the society and also to the environment.

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