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By the audit process, the auditor enhances the usefulness and value of the financial
statements, and also increases the credibility of other non-audited information released
by management.
Audit Definition “An audit is a systematic process of objectively obtaining and evaluating
evidence regarding assertions about economic actions and events to ascertain the
degree of correspondence between these assertions and established criteria and
communicating the results to interested users.” American Accounting Association
TYPES OF AUDIT
Audit of financial statements Examine financial statements, determine if they give a true
and fair view or fairly present the financial statements. Operational Audit A study of a
specific unit of an organization for the purpose of measuring its performance.
Compliance Audit A review of an organization’s procedures and financial records
performed to determine whether the organization is following specific procedures, rules,
or regulations set out by some higher authority.
AUDIT PROCESS
The audit process is similar for most engagements and normally consists of four
stages: Planning (sometimes called Survey or Preliminary Review), Fieldwork, Audit
Report, and Follow-up Review. Client involvement is critical at each stage of the audit
process. As in any special project, an audit results in a certain amount of time being
diverted from your department's usual routine. One of the key objectives is to minimize
this time and avoid disrupting ongoing activities.
There are three discrete types of audits: product (which includes services), process, and
system. However, other methods, such as a desk or document review audit, may be
employed independently or in support of the three general types of audits.
Some audits are named according to their purpose or scope. The scope of a
department or function audit is a particular department or function. The purpose of a
management audit relates to management interests such as assessment of area
performance or efficiency.
Auditing on ASQTV
3 Types of audits
Process audit – A verification that processes are working within established limits. It
evaluates an operation or method against predetermined instructions or standards to
measure conformance to these standards and the effectiveness of the instructions.
Such an audit may:
Examine the resources (equipment, materials, people) applied to transform the inputs
into outputs, the environment, the methods (procedures, instructions) followed, and the
measures collected to determine process performance.
Purposes of audits
An auditor may specialize in types of audits based on the audit purpose, such as to
verify compliance, conformance, or performance. Some audits have special
administrative purposes such as auditing documents, risk, or performance or following
up on completed corrective actions.
Certification
Customers may suggest or require that their suppliers conform to ISO 9001, ISO 14001,
or safety criteria, and federal regulations and requirements may also apply. A third-party
audit normally results in the issuance of a certificate stating that the auditee
organization management system complies with the requirements of a pertinent
standard or regulation.
Follow-up audit
A product, process, or system audit may have findings that require correction and
corrective action. Since most corrective actions cannot be performed at the time of the
audit, the audit program manager may require a follow-up audit to verify that corrections
were made and corrective actions were taken. Due to the high cost of a single-purpose
follow-up audit, it is normally combined with the next scheduled audit of the area.
However, this decision should be based on the importance and risk of the finding.
An organization may also conduct follow-up audits to verify preventive actions were
taken as a result of performance issues that may be reported as opportunities for
improvement. Other times organizations may forward identified performance issues to
management for follow-up.
4 Phases of an audit
Audit performance – The performance phase of an audit is often called the fieldwork. It
is the data-gathering portion of the audit and covers the time period from arrival at the
audit location up to the exit meeting. It consists of activities including on-site audit
management, meeting with the auditee, understanding the process and system controls
and verifying that these controls work, communicating among team members, and
communicating with the auditee.
Audit reporting – The purpose of the audit report is to communicate the results of the
investigation. The report should provide correct and clear data that will be effective as a
management aid in addressing important organizational issues. The audit process may
end when the report is issued by the lead auditor or after follow-up actions are
completed.
Audit follow-up and closure – According to ISO 19011, clause 6.6, “The audit is
completed when all the planned audit activities have been carried out, or otherwise
agreed with the audit client.” Clause 6.7 of ISO 19011 continues by stating that
verification of follow-up actions may be part of a subsequent audit.