INTRODUCTION

What is Auditing?
Auditing is defined as a systematic and independent examination of data, statements, records, operations and performance (financial or otherwise) of an enterprise for a stated purpose [From general guidelines on Internal Auditing issued by ICAI] AUDIT is an independent examination of financial information of an entity, whether profit oriented or not, and irrespective of its size or legal form, when such an examination is conducted with a view to expressing an opinion thereon. Audits can be classified into many types.

Some of them are-

Management audit Environmental audit Energy audit Cost audit Forensic audit Financial audit Operational audit Continuous audit Final audit Interim audit Concurrent audit Inventory audit Balance sheet audit Information technology audit Efficiency audit Account payable audit Propriety audit Social audit

 MANAGEMENT AUDIT
Management Audit is an audit of the management. The management audit would concern itself with the whole field of activities of the concern, from top to bottom, starting, as always where management control is concerned, from top, because we are primarily concerned with whether the general management is functioning smoothly and satisfactorily.

Features
The following features of management audit are clear from the analysis of the above : Management audit is a comprehensive and critical review of managerial performance against external standards. Operational areas which have or may have problems as identified to locate waste and deficiencies to ensure optimum utilization plus human and physical resources. It aims at improving the efficiency and effectiveness of the organization by evaluating managerial decisions. Management auditor may suggest better system of quality and inventory controls and format of the performance appraisal to improve the efficiency of the organization.He may also help the management in its search for improved methods for better and mopre effetive operations such as search for techniques of sales forcasting, changes in organization structure, system of purchasing raw materials, changes in capital budgeting system, etc.

Responsibilities
The auditor will not have to decide whether the management is making the right strategic and operative decisions but rather , whether management has always to it and is using the relevant information and techniques necessary to evaluate rationality the various alternatives that exist. Management audits are concerned with appraising management accomplishment of organizational objectives , the management functions of planning , organizing directing and controlling and the adequacy of managements decisions and actions in moving towards its stated objectives.

The Methods
Usually, great processes of change are the trigger for Management Audits. The handling is very sensitive and has far-reaching consequences, for the individual, as well as for the entire company

 ENVIRONMENTAL AUDIT
Environmental audit is a term commonly used to describe the disclosure by an entity of environmentally sealed verified (audited) or not regarding environmental risks, impacts, policies, strategies, targets, costs, liabilities or performance, to those who have an interest in such information as an aid to enabling enriching their relationship, via either The annual report and accounts package A stand alone Corporate Environmental Performance Report A site centered environmental statement, or Some other medium(e.g. staff news letter , video cd room, internet site)

Environmental audits are becoming increasingly common in certain industries. Audit can be performed by external or internal experts (sometimes including internal auditors). Often the work is performed by a multi disciplinary team and is performed at the request of management and are for internal use. Environmental auditing is a systematic, documented, periodic and objective process in assessing an organization's activities and services in relation to: Assessing compliance with relevant statutory and internal requirements Facilitating management control of environmental practices Promoting good environmental management Maintaining credibility with the public Raising staff awareness and enforcing commitment to departmental environmental policy Exploring improvement opportunities Establishing the performance baseline for developing an Environmental Management System (EMS).

ENERGY AUDIT
An energy audit is a preliminary activity towards instituting energy efficiency programs in an establishment. It consists of activities that seek to identify conservation opportunities preliminary to the development of an energy savings program.

The Role of Energy Audit:

To institute the correct energy efficiency programs, you have to know first which areas in your establishment unnecessarily consume too much energy, e.g. which is the most costeffective to improve. An energy audit identifies where energy is being consumed and assesses energy saving opportunities - so you get to save money where it counts the most. In the factory, doing an energy audit increases awareness of energy issues among plant personnel, making them more knowledgeable about proper practices that will make them more productive. An energy audit in effect gauges the energy efficiency of your plant against best practices. When used as a baseline for tracking yearly progress against targets, an energy audit becomes the best first step towards saving money in the production plant.

 COST AUDIT
It is an audit process of verifying cost of manufacture or production of any articles on the basis of accounts an=s regards utilization of material or labour or other items of costs , maintain by the company. The cost audit is an addition to, and independent of normal financial audits carried out under the sections of the acts.

Types of Cost Audits:

Persons of varied interests (shareholders) may require cost audit reports of a company. Accordingly the different types of cost may be as follows: Cost audit on behalf on management Cost audit on behalf of customers Cost audit on behalf of government Cost audit by trade associations Statutory cost audit.

Responsibilities of the auditor:

The duties of a cost auditor has not been mentioned completely in the companies act . He has to perform all the duties as are expected from auditors in general . The main duties and responsibilities of a cost auditor are as follows: He is liable to the company if he does not perform his duties properly. He is liable to third parties who might have been mislead by his misleading reports. He should not disclose any confidential information known to him during his tenure of his work. He should maintain all his documents as an evidence of his performance of his duties. He is responsible to answer any query required by the central government on the report submitted by him.

FORENSIC AUDIT: Definition

Forensic auditing could be defined as the application of auditing skills to situations that have legal consequences.

Objectivity:
The objective in case of reactive forensic audit is to investigate cases of suspected fraud so as to prove or disprove the suspicions, and if the suspicions are proven, to identify the persons involved, support the findings by evidence and to present the evidence in an acceptable format in any subsequent disciplinary or criminal proceedings.

Qualifications:
Skills for Forensic Audit Knowledge of entitys business and legal environment. Awareness of computer assisted audit procedures. Innovative approach and skeptic of routine audit practices.

Financial Audit
A financial audit is the critical analysis of a business's financial records and documentations. It can be done at any level, from local to governmental. A financial audit or financial profile of the company will be released by the auditor or forensic accountant after completion of the analysis. These financial analyses are usually done by certified public accounting firms and forensic accountants who provide an objective view of the true financial integrity of a company. Audits are intended to show whether a company's financial documentation matches its financial claims. It is not uncommon for a business to employee an internal auditor to monitor financial controls of a company in addition to hiring outside auditors .

Significance
People often read through a company's financial audit before deciding whether or not to become shareholders or investors in the company. Four major companies that do the majority of financial audits in the United States: KPMG, Deloitte, Pricewaterhouse Coopers and Ernest & Young. These companies provide tax support and audit management controls to companies they represent

Structure
Financial audits are done before the end of the fourth quarter of a business's fiscal year to create a financial snapshot of how a business operated in that fiscal year. Auditors weigh industry regulations, the nature of the business and the way the business is administered. Audits look at the accuracy of internal controls, transaction records and ways to eliminate overhead. In addition to testing the accuracy of internal controls, the auditing firms also test new internal control systems.

Operational Audit
An operational audit tests a companys internal systems and procedures used to produce its goods and services sold to consumers. These audits test production operations for efficiency and effectiveness. Audits may be conducted by internal employees or external auditors with business experience relating to the company's operational procedures. Operational audits are usually a deeper review of company operations than a financial audit, which is conducted in an after-the-fact audit process. Benefits from operational audits include objective opinions, improved workflow or cost allocation processes and quicker turnaround times. Staff accountants or accountants from public accounting firms usually conduct operational audits. Using staff accountants for an internal operational audit allows companies to have an

objective opinion on how well the company is using their business resources. Department managers may have a tendency to fudge their audit figures since they often receive compensation bonuses or pay increases from improved operations. Public accounting firms sometimes are used for operational audits to inform outside stakeholders on the operational strength of a companys operations. Objective audit opinions may lead companies to increase their production cost controls.

CONTINUOUS AUDIT
Continuous Audit is defined by R.C WILLIAMS as one where the auditor is constantly or at regular intervals engaged in checking the accounts during the period. Continuous audit means an audit at regular intervals throughout the accounting year. Generally, the audit work begins after the accounting year itself. For example, if the accounting year begins on 1st April 2002 and ends on 31st March 2003, normally audit work would begin in April 2003 and continue thereafter. But in case of a continuous audit the work would begin in April 2002 itself and continue at regular intervals till it is complete. Thus in continuous audit, accounting and auditing work is done almost side by side. Continuous Audit, however, does not mean the audit work goes on for 365 days of the year. The auditor may make periodical visits, say, every two or three months during the year. At each visit, the work would be taken up from where it was left in the earlier visit. ADVANTAGES OF CONTINUOUS AUDIT Quick preparation of final account

Early dividend to shareholders Check on employees

DISADVANTAGES OF CONTINUOUS AUDIT Expensive Audit in installments Disrupts accounts work.

FINAL OR PERIODIC OR ANNUAL AUDIT

Spicer and Pegler define it as an audit which is not commenced until after the end of the financial year and then carried on until completed. Final or periodic Audit means an audit taken up after the end of the accounting year. The audit work begins only after the accounting year is over. Generally majority of audits are in the nature of Final, annual or periodic Audits ADVANTAGES OF ANNUAL AUDIT Inexpensive Less errors and frauds Does not disrupt accounts work

DISADVANTAGES OF ANNUAL AUDIT Delay in final accounts Late dividends to shareholders No moral check on employees INTERIM AUDIT INTERIM AUDIT is an audit conducted during the fiscal year usually as a means of minimizing the work and time involved in concluding the audit after the fiscal year. A corporation might have an interim audit covering the first nine months of the fiscal year so that at the end of the fiscal year most of the auditing will focus on the last three months of the fiscal year thus allowing for a comprehensive audit and early completion of the audit reports. An interim audit does not usually yield any formal reports from the external auditors. Like any type of auditing task, an interim audit will involve close examination of financial records. Interim auditing standards are the same as those used to conduct any type of accounting or inventory check, and must comply with all policies and procedures that are part of the final audit process. This is necessary since the data collected and analyzed during the interim auditing has a direct effect on the outcome of that end-of-year audit.

CONCURRENT AUDIT
The concept of concurrent audit has been introduced to reduce the time gap between occurrences of transaction and is overview or checking. The concurrent audit serves the purpose of effective control as it is normally conducted by external agencies like chartered accountants firms. Concurrent audit is an examination, which is contemporaneous with the occurrence of transactions or is carried out as near thereto as possible. The main focus while conducting concurrent audit it to ensure that transactions are not dealt with in routine but in adherence with the systems and procedures laid down. We ensure that the transaction or decisions are within the policy parameters laid down, they do not violate the instructions or policy prescriptions, and that they are within the delegated authority and in compliance with the terms and conditions for exercise of the delegated authority.

INVENTORY AUDIT
In inventory audit is a very straight-forward task. Inventory is tangible and can be counted. Misstated inventory figures are usually a result of incomplete inventory records, returns or purchases, improper receiving and shipping controls, improperly documented damaged and disposed of inventory or theft. With inventory, you physically count it. You must separate company-owned inventory from third-party-owned inventory. Once this process is complete, you can reconcile these figures with your accounting records. A combination of the payables, receivables and inventory audit will usually locate any fraud.

 BALANCE SHEET AUDIT

A balance sheet audit, or balance sheet reconciliation audit, is an audit of the accounts on the balance sheet. These audits usually focus heavily on the cash, accounts payable, accounts receivable and inventory. Land, buildings, intangible assets and long term investments are very difficult to misrepresent. Accounts payable and receivables, however, can be easily misstated in either direction. Inventory can easily be misstated either by mistake or on purpose. This audit is not conducted in all cases. Such audits are conducted in case of very large organizations, banks etc in the following circumstances The internal control system is very strong and the system is capable of detecting errors and frauds. The volume of transaction is so large that an in-depth checking is not possible. A detailed vouch-and-post audit is not possible if the final accounts are to be ready in time. The concern has its own internal audit department and hence the statutory auditor need not duplicate his work. The accounts staff is highly qualified, the management is professional and accounts are computerized.

INFORMATION TECHNOLOGY AUDIT

IT Audit is the process of collecting and evaluating evidence to determine whether a computer system has been designed to maintain data integrity, safeguard assets, allows organizational goals to be achieved effectively, and uses resources efficiently. Data integrity relates to the accuracy and completeness of information as well as to its validity in accordance with the norms. An effective information system leads the organization to achieve its objectives and an efficient information system uses minimum resources in achieving the required objectives. IT Auditor must know the characteristics of users of the information system and the decision making environment in the organization while evaluating the effectiveness of any system.

EFFICIENCY AUDIT
Efficiency Audit means the review of utilization of resources. The resources of an enterprise are under the control of different operational departments. The management is interested in ascertaining efficiency and economy with which they have been managed and used. The resources may be tangibleproduction capacity, cash. etc; or intangible e.g. its goodwill or trained manpower. The management is interested in knowing whether the use of tangible resources (cash, machinery etc.) has been optional; or whether intangible resources like goodwill are lost (due to bad management) or enhanced (by good management). The auditor should check whether proper operating standards in monetary and/or quantitative terms have been established for measuring economical and efficient use of resources.

 ACCOUNTS PAYABLE AUDIT

An accounts payable audit is designed to determine if a company has over paid, paid more than once for the same item or paid for a non-existent product or service. One way that many criminals steal from their employers is to pay a vendor for a product or service that was not provided. The vendor then splits the proceeds with the employee. A random audit of the accounts payable followed by an inventory audit will usually deter this kind of activity. When over-payments are discovered, companies can try to recover the lost proceeds. Verification of randomly selected payable accounts is essential to maintain proper controls.

PROPRIETY AUDIT
Propriety Audit stands for verification of transactions on the tests of public interest, commonly accepted customs and standards of conduct. The term propriety is defined as that which meets the tests of public interest, commonly accepted customs or standards of conduct, and particularly as applied to professional performance, requirements of law, government regulations and professional codes. Instead of too much dependence on documents, vouchers and evidences, it shifts the emphasis to the substance of the transactions and looks into appropriateness thereof on a consideration of financial prudence, public interest and prevention of wasteful expenditure. Thus propriety audit is concerned with scrutiny of executive actions and decisions affecting the performance and financial position of the company with special regard to public interest and commonly accepted customs, and standards of conduct.

SOCIAL AUDIT
Governments are facing an evergrowing demand to be more accountable and socially responsible and the people are becoming more assertive about their rights to be informed and to influence governments decisionmaking processes. Faced with these vociferous demands, the executive and the legislature are looking for new ways to evaluate their performance. Civil society organizations are also undertaking Social Audits to monitor and verify the social performance claims of the organizations and institutions. Social Audit is a tool with which government departments can plan, manage and measure nonfinancial activities and monitor both internal and external consequences of the department/organizations social and commercial operations. It is an instrument of social accountability for an organization. In other words, Social Audit may be defined as an indepth scrutiny and analysis of the working of any public utility visvis its social relevance.

BIBLIOGRAPHY

http://daf.csulb.edu/offices/univ_svcs/internalauditing/audits.html http://guide.isohelpline.com/content/types-audit
FYBAF SEM-II AUDITING AINAPURE

PRESENTED BYPOOJA JAIN-14