Types of audit

Based on ownership:

On the basis of ownership audit can be:-

1. Audit of Proprietorship:

In case of proprietary concerns, the owner himself takes the decision to get the accounts audited. Sole trader will decide about the scope of audit and appointment of auditor. The auditing work will depend upon the agreement of audit and the specific instructions given by the proprietor.

2. Audit of Partnership:

To avoid any misunderstanding and doubt, partnership audits their accounts. Partnership deed on mutual agreement between the partners may provide for audit of financial statements. Auditor is appointed by the mutual consent of all the partners Rights, duties and liabilities of auditor are defined in the mutual agreement and can be modified by the partners.

3. Audit of Companies:

Under companies Act, audit of accounts of companies in India is compulsory. Chartered accountant who is professionally qualified is required for the audit of accounts of companies. Companies Act 1913 for the first time made it compulsory for joint stock companies to get their accounts audited from a qualified accountant. A number of amendments have been made in companies Act, 1956 and 2013 regarding appointment, duties qualification, power and liabilities of a qualified auditor.

4. Audit of Trusts:

The beneficiaries of the trusts may not have access and knowledge of accounts of the trust. The trustees are appointed to manage and look after the property and business of the trust. Accounts of the trust are maintained as per the conditions and terms of the trust deed. The income of the trust is distributed to the beneficiaries. There are more chances of frauds and misappropriation of incomes. In the trust deed as well as in the Public Trust Act which provide for compulsory audit of the

accounts of the trust by a qualified auditor. The audited accounts of the trust ensure true

and fair view of accounts of the trust.

5. Audit of Accounts of Co-operative Societies:

Co-Operative societies are established under the Co-Operative Societies Act, 1912. It contains various provisions for the regulations and the working of these societies. Some of the states have adopted it without any change, while others have brought certain changes to it. The auditor of the Co-operative Society should have an expert knowledge of the particular act under which Co-operative society under audit is functioning. He should also study by-laws of the society and make sure that the amendments made from time to time in the by-laws have been duly registered in the Registrar’s Office. Companies Act is not applicable to the co-operative Societies.

The Registrar of co-operative societies shall audit or cause to be audited by some person authorized by him, the accounts of the society once in every financial year.

6. Government Audit:

Audit of government offices and departments is covered under this heading. A separate department is maintained by government of India known as Accounts and Audit Department. This department is headed by the Comptroller and Auditor General of India. This department works only for the government offices and departments. This department cannot undertake audit of non-government concerns. Its working is strictly according to government rules and regulations.

Based on time:

 On the basis of time the audit can be of following types:

1. Interim Audit:

When an audit is conducted between two annual audits, such audit is known as Interim audit. It may involve complete checking of accounts for a part of the year.

Sometimes it is conducted to enable the board of directors to declare an Interim dividend. It may also be for the purpose of dealing with interim figures of sales.

2. Continuous Audit:

The Continuous Audit is conducted throughout the year or at the regular short intervals of time.

“A continuous audit involves a detailed examination of all the transactions by the

auditor attending at regular intervals say weekly, fortnightly or monthly, during the whole period of trading.” - T.R. Batliboi

“A continuous audit is one where the auditor or his staff is constantly engaged in

checking the accounts during the whole period or where the auditor or hiss staff attends at regular or irregular intervals during the period.” -R.C Williams

Based on objective :

On the basis of objectives the audit can be of following types:

1. Internal Audit:

It implies the audit of accounts by the staff of the business. Internal audit is an appraisal activity within an organization for the review of the accounting, financial and other operations as basis for protective and constructive service to the management. It is a type of control which functions by measuring and evaluating the effectiveness of other types of control. It deals primarily with accounting and financial matters but it may also properly deal with matters of operating nature.

2. Cost Audit:

Cost Audit is the verification of the correctness of cost accounts and adherence to the cost accounting plans. Cost Audit is the detailed checking of costing system, techniques and accounts to verifying correctness and to ensure adherence to the objectives of cost accounting.

3. Secretarial Audit:

Secretarial Audit is concerned with verification compliance by the company of various provisions o Companies Act and other relevant laws. Secretarial audit report includes :

a. Whether the books are maintained as per companies act, 2013.

b. Whether necessary approvals as required from central Government, Company law

board or other authorities were obtained.

4. Independent Audit:

Is conducted by the independent qualified auditor. The purpose of independent audit is to see whether financial statements give true and fair view of financial position and profits. Mainly it is for safeguarding the interest of owners, shareholders and

other parties who do not have knowledge of day-to-day operations of organization.

5. Tax Audit:

Now-a-days tax audit has become very important to ascertain the accuracy of

tax related documents. Tax audit mostly covers income returns, invoices, debit and credit notes and various current and fixed assets. Tax audits are an innovation of the 21st century. It has added one more chapter to the practice of auditing. Tax audit ensures the validity and credibility of tax related documents.