An audit is basically a comprehensive process of checking and verifying that a product or process is compliant with a set of standards or requirements. Its coverage is extensive – it can be applied to an entire organization or business, or simply to a particular product, process, function, or system.
There are several types of audits performed, but this article will focus on internal auditing and its variations.
What is an Internal Audit?
The purpose of an internal audit is to provide an objective and complete look into the operations of an organization. It should be done by an independent party to ensure a wholly unbiased approach. Internal audits assess the risk management and internal controls set in place by organizations.
Accordingly, internal auditors will make recommendations to help organizations improve and achieve further growth. Essentially, the goal of internal audits is to help organizations realize long-term stability and sustainability in order to succeed.
Types of Internal Audits
1) Financial Audit – A financial audit delves into the financial reports and financial reporting process of an organization. It seeks to gives shareholders, investors, company executives, and directors the assurance that the organization is financially viable and stable, and its financial statements are complete, accurate, and adhere to laws and regulations and internal policies. Financial audits also examine the organization’s control and management of its revenues and expenses.
2) Compliance Audit – Compliance audits are conducted to determine if an organization adheres to international and local laws and regulations, as well as to policies and procedures. Compliance audits may encompass processes or systems related to accounting, Information Technology, and security. It may also include financial and operational controls and procedures to determine if these conform to governing laws and regulations.
3) Operational Audit – The objective of an operational audit is to assess how an organization utilizes its resources in relation to fulfilling its mission, vision, commitment, and deliverables. Through an operational audit, experts get a profound view of the overall level of efficiency and effectiveness of an organization. An operational audit is usually viewed as a more extensive type of internal audit.
4) IT Audit – Information Technology audits aim to evaluate how an organization manages its IT systems. It gives organizations a clear view of the robustness and strength of their internal IT infrastructure, as well as its weaknesses and areas for improvement. IT audits give organizations assurance that all their data and trade secrets are protected and stored properly. IT auditors also assist organizations in establishing contingency plans in case of emergencies and unforeseen circumstances.
5) Special Audit – A special audit is implemented for special circumstances, such as when requested by an executive of the organization. The scope is limited to the specific concerns of the incident. Investigations of this kind seek to give independent and unbiased outlook and to prove or disprove certain claims.