Generally the audit to be undertaken depends on the reason as to why the auditing exercise is required. There are quite a number of types of audits. These are:
- Statutory Audits
- Private Audits
- Internal Audits
- Management Audits
- Government Audits
Each of these types are explained here below
These are those audits that carried out as stipulate and governed by the prevailing laws of the land. These legislations include Companies’ Act Cap 486, Building Societies’ Act, and Provident Act and other legal provisions. There is a legal requirement for these audits failure to which the directors and other officers of the company are liable to an offence
A private audit is carried by an independent auditor at the request of the shareholders or other interested stakeholders. The cost incurred is borne by the shareholders or the stakeholders who requested the audit. This is not a legal requirement but a personal or group request. There varied reason why the group or a person is interested in this type of audit. Some of the reasons include:
- Before liquation
- During mergers
- During take – overs
- During IPOs
Internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization’s operations. It is an independent appraisal technique or activity used to review the operations of the business organisation.
It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes. Internal auditing is a catalyst for improving an organization’s effectiveness and efficiency by
providing insight and recommendations based on analyses and assessments of data and business processes. With commitment to integrity and accountability, internal auditing provides value to governing bodies and senior management as an objective source of independent advice.
Professionals called internal auditors are employed by organizations to perform the internal auditing activity.
The scope of internal auditing within an organization is broad and may involve topics such as the efficacy of operations, the reliability of financial reporting, deterring and investigating fraud, safeguarding assets, and compliance with laws and regulations. Internal auditing frequently involves measuring compliance with the entity’s policies and procedures. However, internal auditors are not responsible for the execution of company activities; they advise management and the Board of Directors (or similar oversight body) regarding how to better execute their responsibilities. As a result of their broad scope of involvement, internal auditors may have a variety of higher educational and professional backgrounds.
Internal is thus:
- Carried out by personnel – the internal auditor is appointed by the management and is expected to be independent in that he/she reports directly to the board of directors to the auditing committee of the board of directors.
- An appraisal activity – the work of internal auditors is to appraise the work done by the others within the organisation
- A service to the management – the management needs that the policies are fulfilled besides that the information used is both reliable and complete. The management requires also that the company’s assets and resources are well safeguarded. It is sole responsibility of the internal auditor to make that the policies are adhered to, information is reliable and complete and that the assets and resources are safeguarded.
- Managerial control – the internal auditor is concerned that the internal control system is effective and efficient and working as required. There need to measure and evaluate the continuous effectiveness and efficiency of the internal control systems