Know Types of Audits in Organizational Processes

Audits are an effective way for businesses to get in-depth information about their policies and procedures. The audit process provides detailed reports that owners and stakeholders can use to make financial and operational decisions. However, there is one type of audit in organizational processes.

The nature of this audit varies depending on the information required by the auditor and the purpose of the audit. In this article, we will explain the purpose of an audit and provide a description of 15 different types of audits.


1 What is an Audit?
2 15 Types of Audits

2.1 1. Audit Internal
2.2 2. External Audit
2.3 3. Tax Audit
2.4 4. Financial Audit
2.5 5. Operational Audit
2.6 6. Compliance Audit
2.7 7. Information System Audit
2.8 8. Employment Audit
2.9 9. Payment Audit
2.10 10. Integrated Audit
2.11 11. Forensic Audit
2.12 12. Compulsory Audit
2.13 13. Value For Money Audit
2.14 14. Agreed Audit Procedure
2.15 15. Special Audit

What is an Audit?

An audit is a detailed examination or inspection of an existing system, report or entity, such as financial records.

There are different categories of audits that are conducted from within the company or external organization.

Auditors will review and examine departments, processes, policies or functions within the company.

Some types of audits seek to identify areas of inefficiency and make recommendations for improvement, while others are designed to examine non-compliance or errors within the organization.

Depending on the type of audit, the results of the audit may be shared with the owner of the company or the government agencies and organizations being audited.

15 Types of Audits

Here are 15 types of audits that businesses, organizations and institutions can perform:

1. Audit Internal

An internal audit is performed by a person or team within your organization.

Internal audits can help executives, business owners, and stakeholders get an accurate picture of the company’s health.

Company owners or stakeholders typically commission internal audits that focus on the following types of investigations:

  • Financial accounting and reporting
  • Policy and legal compliance
  • The effectiveness of the current procedure
  • Operational problems

2. External Audit

External audits are conducted by third parties who are impartial to any business organization. Examples include government agencies and financial firms.

Auditors must comply with Generally Accepted Accounting Principles (GAAP) when handling your company information.

An external audit is a more formal type of audit than an internal audit and is often used to demonstrate the reliability of your organization’s financial and operational records.

For example, a clothing retailer may hire an external auditor to examine how to improve inventory management, recruit salespeople, and market products.

3. Tax Audit

Officers from the Directorate General of Taxes conduct tax audits to verify the accuracy of the information submitted on corporate tax returns, ensure that your tax payments are correct and ensure that your reported tax obligations are correct.

The Tax Officer will access all of your company’s financial records and can perform tax audits on the spot, over the phone, or digitally.

A tax audit is an external audit, as the auditor works for an outside entity and is not related to your business.

The existence of a tax audit does not mean that there is an error on the part of the company. The Director-General of Taxes selects companies to be audited every year based on various data.

4. Financial Audit

A financial audit is basically an examination of financial statements or other reports by an independent person or organization in which the opinion is expressed based on the facts of his research.

There are many types of audits and different levels of opinion given by auditors.

Auditors help users of financial statements, especially stakeholders or business owners, to get better information and insight into the financial statements they use.

On the other hand, auditors are supervisors who work on behalf of the owners or shareholders to verify the financial statements prepared by the directors (people who run the company).

In general, to ensure that the opinion given is unbiased and reliable, the audit needs to maintain its core code of conduct and follow the mandatory guidelines of the professional body that controls it in that jurisdiction.

For example, external auditors audit financial statements based on applicable law and need to follow the Indonesian Institute of Certified Public Accountants (IAPI) code of ethics.

Internal auditors who follow the IIA, must follow the IIA code of ethics. Auditors may use different audit approaches and audit strategies based on their professional judgment. 

5. Operational Audit

An operational audit is designed to evaluate and analyze an organization’s operations, including its policies, procedures, objectives, philosophy and culture.

Usually, this audit process is carried out internally.

The operational audit seeks to identify areas of inefficiency and make recommendations to reduce costs, streamline processes and create better policies.

For example, manufacturers can conduct a company supply chain management audit to identify ways to reduce costs and streamline product delivery procedures.

6. Compliance Audit

Compliance audits are used to determine whether the company complies with internal and external regulations. This may include checking company standards, local regulations and State and local laws.

Companies want to conduct compliance audits to maintain safe & fair working conditions, ensure product quality and minimize risks.

For example, a plant manager may commission quarterly compliance audits to ensure employees follow safety guidelines in order to use and maintain proper equipment, cleaning facilities, and rest periods.

7. Information System Audit

An information systems audit is the process of examining the information technology in your organization to ensure you are practicing and using the best tools for systems management and security.

Software, IT, and other technology companies rely on information systems audits to:

  • Ensuring the personal data of its customers is safe
  • Protect company servers and systems from hacking
  • Evaluating data processing technology
  • Recommend software and other tools for specific business needs, such as project management

8. Payroll Audit

A payroll audit will verify the accuracy of all information related to payroll processing to employees, including:

  • Tax deduction
  • Employee hours and wages
  • Employee information, such as address and contact information

Businesses often have in-house human resources or administrative professionals who perform this type of audit. This process usually occurs every month or every year according to company policy.

9. Payment Audit

A payments audit analyzes all payment data from your organization to ensure that there is no risk in payment processing and employee welfare insurance.

Auditors compare your company’s wages with similar companies in your area to make sure your payroll data is comparable, which will help your business stay competitive in recruiting employees.

10. Integrated Audit

Integrated auditing is a process that deals with how an organization analyzes and controls its accounting and financial reporting for public sharing.

Auditors adhere to strict guidelines developed by the Public Company Accounting Oversight Board and work to identify and evaluate how companies oversee transactions, financial processes and operations.

11. Forensic Audit

A forensic audit is a highly technical audit that is often performed as part of a criminal or civil investigation.

Forensic auditors apply knowledge of accounting and investigative procedures.

The results of such audits can be used as evidence in legal proceedings or to resolve disputes between the company or the company’s shareholders.

For example, forensic auditors may investigate investment firms to verify the management of all company and client assets on legal grounds.

12. Mandatory Audit

Mandatory audits are audits conducted to comply with government regulations for public companies, banks, investment companies, and insurance companies.

This process generally includes an external audit that verifies certain financial statements accurately and accordingly, including:

  • Bank statements
  • Number of clients or customers
  • Investment income

Many government agencies undergo mandatory audits under the law and publish their audit reports to the public.

This is done to increase transparency and public trust.

13. Value For Money Audit

Value for money audits are often used in nonprofit organizations to assess resource management and operations.

This audit specifically studies:

  • Economics: Auditors review how companies acquire and distribute resources.
  • Effectiveness: A Value for Money audit evaluates how effectively organizations use their resources to meet their overall financial and operational objectives.
  • Efficiency: Auditors analyze the efficiency of company processes and systems.

For example, the auditor might find a charity for orphans paying more for groceries.

Auditors can make recommendations for charities to find alternative suppliers, which will assist them in redistributing funds to other charitable divisions.

14. Agreed Audit Procedure

In agreed-upon procedures (AUP) audits, the party requesting the audit and the party conducting the audit must agree on certain requirements.

Often AUP audits are used to evaluate certain processes or procedures, and the results are only shared with the parties specified in the agreement.

For example, an organization leader may conduct an audit to find out how the product development division is using its resources.

Companies can also use an AUP audit to learn more about the company they wish to acquire or merge.

In the AUP audit report, the auditor will share objective information and not an audit recommendation or opinion.

15. Special Audit

A special audit is usually an internal audit that focuses on a narrow function or process within the company.

Owners, stakeholders, or top management may authorize a special audit.

Sometimes special audits are the result of certain allegations of fraud or error.

Specialized audits can investigate areas such as:

  • Safety compliance
  • Construction
  • Recruitment procedure
  • Fraudulent acts
  • Royalties
  • Tax

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