What are the Different Types of Audit Services?

Osmand Vitez

Audit services are an accounting function offered by public accounting firms or private certified public accountants (CPA) in the business environment. Audits are typically an external review of the company’s financial or business information for a variety of purposes. Companies typically use audits to assure company stakeholders that the company’s financial information is accurate or that the company is operating according to a specific set of guidelines. Common audits used in the business environment include financial, operational, compliance, information technology and advisory services.

Audits are conducted by certified public accountants.
Audits are conducted by certified public accountants.

Financial audit services are perhaps the most common type of audit. These audits include a review of the company’s financial accounting processes and measure how well the company is recording and reporting financial information to internal and external stakeholders. Auditors usually test the company’s financial information against a standardized set of accounting principles, such as the generally accepted accounting principles (GAAP) in the United States (U.S.) or the International Financial Reporting Standards (IFRS) used in many countries.

Certified public accountants can audit an organization's finances and also check for compliance with legal and professional standards.
Certified public accountants can audit an organization's finances and also check for compliance with legal and professional standards.

Operational audit services help ensure that a company’s individual business departments are operating according to specific business standards. While companies may use external auditors to perform this function, operational audits may also be conducted by company employees. When company employees conduct the audit, it is commonly referred to as an internal audit. Internal audits are usually less formal than external audits and are primarily used for management review.

Internal audits are less formal and are normally used for management reviews.
Internal audits are less formal and are normally used for management reviews.

Compliance audits are conducted to ensure that companies are following a specific set of guidelines, usually from an external organization. These audit services may be used by government regulators, insurance companies or professional organizations that give companies a professional designation. The Occupational Health and Safety Association (OSHA) is an organization in the U.S. that uses compliance audits to ensure its members meet certain business operational standards.

Information technology audit services are conducted by external auditors to ensure that companies are properly maximizing the business technology currently used in their operations. This audit usually reviews the individual business technology components used by the company and ensures that no opportunities exist for internal or external abuse. Companies with high levels of business technology, such as Internet retailers or business fulfillment companies, may require more information technology audit services to ensure important business information cannot be compromised by hackers or computer viruses and worms.

Consultation or advisory audit services may be offered by public accounting firms as an initial review of a company’s business operations. These services are usually less intense than traditional audits. Consulting and advisory services are normally used to determine what type of audit a company may need and how much it may cost. Public accounting firms that provide consulting services may not be able to conduct an audit of the company, depending on the particular jurisdiction's industry accounting rules and regulations.

Information technology audit services ensure important business information cannot be compromised by hackers.
Information technology audit services ensure important business information cannot be compromised by hackers.

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Discussion Comments

Certlerant
@Glasis: In many cases, audits that involve companies lead to securities violations imposed by the Securities and Exchange Commission.

In the case of individual executives or board members, audits can result in criminal charges.

Although most formal investigations and charges stem from external audits, companies that commit the time and resources necessary for an internal audit often do so because they suspect or have been informed of wrongdoing within the organization.

As a result, the information revealed in internal audits, as well as investigations conducted by special committees of a company's board, often prompt the need for external audits.

Glasis

Can an audit lead to criminal charges against a company and/or members of its management?

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