01. What is Auditing & Kinds of Auditing ?
Auditing:
Auditing is a systematic and scientific examination of
the books of accounts and records of business to enable the auditor to
satisfy himself that the profit and loss account and the balance sheet are
properly drawn up so as to exhibit a true and fair view presentation of the financial
statement in the Accounting period.
Kinds of Auditing:-
Audits are typically classified into three types:
01. Audits of financial statements,
02. Operational audits, and
03. Compliance audits.
■ 01. Audits of Financial Statements
Audits of financial statements examine financial statements to determine if they give a true
and fair view presentation of the financial statements in conformity with specified
criteria. That means , International Financial Reporting Standards (IFRS), generally
accepted accounting principles (GAAP) as in the USA, national company laws as in Bangladesh. This book primarily discusses audit of financial statements.
■ 02. Operational Audits
An operational audit is a study of a specific unit of an organization for the purpose of
measuring its performance. Operational audits review all or part of the organization’s
operating procedures to evaluate effectiveness and efficiency of the operation.
Effectiveness is a measure of whether an organization achieves its goals and objectives.
Efficiency shows how well an organization uses its resources to achieve its goals.
03. Compliance Audits
A compliance audit is a review of an organization’s procedures to determine whether the
organization is following specific procedures, rules or regulations set out by some higher
authority. A compliance audit measures the compliance of an entity with established
criteria.