STATUTORY AUDIT

A statutory audit is a legally required check of the accuracy of the financial statements and records of a company or government. A statutory audit is intended to determine if an organisation delivers an honest and accurate representation of its financial position by evaluating information, such as bank balances, financial transactions, and accounting records.

The provisions relating to statutory audit and auditors is the sections 139 to 147 of the new Companies Act 2013. It states the method of appointing an auditor, the eligibility of a statutory auditor and the duties and responsibilities of such an auditor.

INTERNAL AUDIT

Internal audit plays a vital role in the day to day operations and functioning of the company. Companies Act, 2013 and its rule thereof have prescribed many companies who are mandatorily required to adopt internal audit system. Some of the main objectives of internal audit are highlighted hereunder – To evaluate the company’s internal controls; To ensure complete compliance with laws, rules and regulations; To evaluate the risk management system; To establish better procedures and policies; To ensure adequate compliance of the law; To protect the interest of the shareholders; To ensure integrity and accountability; etc.

Provisions of section 138 of the Companies Act, 2013 read with rule 13 of the Companies (Accounts) Rules, 2014 prescribes the internal audit in specified companies. Accordingly, the following companies are required to undertake internal audit – Type of company Criteria for applicability of internal audit, Every listed company All the listed companies are required to carry out internal audit. Every unlisted public company Unlisted public company satisfying any of the following criteria during the preceding Financial Year – Turnover of INR 200 Crores or more; Paid up share capital of INR 50 Crores or more; Outstanding loans/ borrowings from banks/ Public Financial Institutions exceeding INR 100 Crores or more at any point of time; or Outstanding deposits of INR 25 Crores or more at any point of time. Every private company Private company satisfying any of the following criteria during the preceding Financial Year – Turnover of INR 200 Crores or more; Outstanding loans/ borrowings from banks/ Public Financial Institutions exceeding INR 100 Crores or more at any point of time.

BANK CONCURRENT AUDIT

A financial entity requires continuous monitoring of transactions. For an entity like a bank, the review mechanism must be robust and unabating. Hence the need for a concurrent audit. Concurrent audit means a parallel examination of the financial transactions, i.e. examination at the time of the happening of the transaction. It is part of an early warning system of a bank for ensuring timely detection of lapses or irregularities.

As the name itself suggests, it is an audit that takes place at the moment when transactions take place, that means it is parallelly conducted. Unlike most audits that are post transactional review, the concurrent audit is as and when transactions take place. It gives an early warning to ensure timely detection of irregularities and lapses.

STOCK AUDIT

Simply put, a stock audit, sometimes referred to as an inventory audit, is the process of ensuring that the actual goods present in your store’s warehouse correspond to the information found in the stock register. Inventory audits may be carried out internally or by external auditors who can guarantee maximum openness in the outcomes. Unless the audit is required as part of a regulatory or licencing process, you are totally free to choose between hiring a professional and conducting a stock inventory on your own. The specifics of the procedure in this situation will be determined by the laws of the nation in where your business and/or its warehouse are registered.

REVENUE AUDIT

Revenue leakage is the one of the critical components of the Bank Audit. In some banks, it is conducted separately while some consider it as a part of Concurrent Audit or Statutory Audit or Internal Audit. Before commencing the audit, we should obtain the following documents from the respective (Bank Branch) business unit preferably on the e-mail. Last year Revenue Leakage Report; (if any) Loan Balance File (it includes all facilities sanctioned by branch such as Overdraft, Cash Credit, Term Loans etc.); Master Circular for applicable loans sanctioned by branch; List of SMA & NPA Accounts of branch and Recoveries made during audit period against them.

SUPPLY CHAIN MANAGEMENT AUDIT

A supply chain audit is an in-depth assessment of all the operations that make up a business’s supply chain. A supply chain audit’s primary goal is to identify weaknesses, including bottlenecks, disruptions, unmet customer expectations and any other inefficiencies that cause slowdowns or impact the bottom line. For audits to provide decision-makers with the insights they need to address those weaknesses, businesses must prepare a robust audit plan and conduct it with intention. Otherwise, the audit may only identify symptoms of inefficiencies, leaving businesses to waste time and resources on damage control rather than improving root causes. Depending on their needs and capabilities, businesses can bring in outside auditors, use internal supply chain experts already on staff or rely on a mix of the two to conduct their supply chain audits. But whoever conducts the audit needs to be objective and prioritize the ultimate goals — to identify weaknesses, plan corrective actions and create a more resilient supply chain.

COST AUDIT

A cost audit represents the verification of cost accounts and checking on the adherence to cost accounting plan. Cost audit ascertains the accuracy of cost accounting records to ensure that they are in conformity with cost accounting principles, plans, procedures and objectives.^[1] A cost audit comprises the following;

• Verification of the cost accounting records such as the accuracy of the cost accounts, cost reports, cost statements, cost data and costing technique
• Examination of these records to ensure that they adhere to the cost accounting principles, plans, procedures and objective
• To report to the government on optimum utilisation of national resources

COMPLIANCE AUDIT

Compliance audits are formal evaluations or assessments of an organization’s adherence to frameworks and/or regulatory requirements. Compliance audits are conducted by independent audit practitioners, and most have the following characteristics:

• Based on frameworks or regulatory requirements.
• Evaluates an organization’s posture in-depth based on the guidance and requirements of the target framework or compliance regulation.
• Performed by an independent or third-party auditor.
• Results in some kind of final deliverable, like a report, an assessment, or an audit opinion.

During a compliance audit, businesses should expect to go through interviews about internal controls. You will likely be asked to provide documents or evidence to show that you’re “walking the talk” in carrying out compliance requirements. Auditors must meet their own standards, exercising their judgment and professional skepticism with the aim of reaching “reasonable assurance” that an organization is conducting the activities stipulated by the target framework or regulation.

GOVERNANCE/MANAGEMENT AUDIT

Audit governance ensures clarity over the purpose and responsibilities of the audit, that there’s an official mandate and clear departmental goals are in place.

Internal audit should be suitably positioned, resourced and have the authority within the organisation to enable it to fulfil its role effectively and deliver robust assurance which feeds up through the management and governance frameworks.

The establishment and approval of the internal audit charter and associated policies and procedures assists in achieving this. The charter should be widely published providing clarity over the purpose and responsibilities of the internal audit function ensuring there is a clear official mandate.

SOCIAL AUDIT

A social audit is a formal review of a company’s endeavors, procedures, and code of conduct regarding social responsibility and the company’s impact on society. A social audit is an assessment of how well the company is achieving its goals or benchmarks for social responsibility.

Ideally, companies aim to strike a balance between profitability and social responsibility. A social audit is an internal examination of how a particular business is affecting society. The audit helps companies to determine if they’re meeting their objectives, which may include measurable goals and benchmarks. A social audit serves as a way for a business to see if the actions being taken are being positively or negatively received and relates that information to the company’s overall public image.

In the era of corporate social responsibility, corporations are often expected to deliver value to consumers and shareholders as well as meet environmental and social standards. Social audits can help companies create, improve, and maintain a positive public relations image. For many companies, a good public perception helps foster a positive image of the company and ultimately reduce negative impacts on earnings from bad press.

ENVIRONEMNT AUDIT

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)

Conducting an environmental audit is no longer an option but a sound precaution and a proactive measure in today’s heavily regulated environment. Indeed, evidence suggests that EA has a valuable role to play, encouraging systematic incorporation of environmental perspectives into many aspects of an organisation’s overall operation, helping to trigger new awareness and new priorities in policies and practices.

ENERGY CONSERVATION AUDIT

The main objective of energy audit in existing government building is to identify the end use of energy in building and its Energy Conservation opportunities; and as a feasibility study leading to implementation of an energy management programme. The audit procedures can be expanded as needed in the various phases of the energy programme, with the application of each succeeding phase yielding more information on energy use, and more opportunities for raising energy efficiency & its conservation.

INFORMATION SYSTEM AUDIT

An information technology audit, or information systems audit, is an examination of the management controls within an Information technology (IT) infrastructure and business applications. The evaluation of evidence obtained determines if the information systems are safeguarding assets, maintaining data integrity, and operating effectively to achieve the organization’s goals or objectives. These reviews may be performed in conjunction with a financial statement audit, internal audit, or other form of attestation engagement.

IT audits are also known as automated data processing audits (ADP audits) and computer audits.

They were formerly called electronic data processing audits (EDP audits).