Types of Audits: 14 Types of Audits and Level of Assurance
Overview Types of Audits:
The audit is an art of systematic and independent review and investigation on certain subject
Mater including financial statements, management accounts, management reports, accounting
records, operational reports, revenues reports, and expenses reports, etc.
The result of reviewing and investigation will be reported to shareholders and other key internal
Stakeholders of the entity for their decision making or others purpose as they needed.
Audit reports sometime submit to other stakeholders like government, banks, creditors or public.
For example, the statutory audit report is submitted to the regulator or authority like the tax
Department, the central bank, or the security authority.
The audit is classified into many different types and levels of assurance according to the
Objectives, scopes, purposes, and procedures of how auditing is performed.
The execution of a financial statements auditing is normally in accordance with International
Standards on Auditing (ISA) as well as other local auditing standards.
There are many types of audits including financial audit, operational audit, statutory audit,
Compliance audit and so on.
In this article, we will explain the main 14 types of audits being performed in the current audit
Industry or practices.
Here is the list of 14 Types of Audits and Level of Assurance:
#1: External Audit
The external audit is referring to the audit firms that offer certain auditing services including
Assurance Service, Consultant Service, Tax Consultant Service, Legal Service, Financial Advisory,
And Risk Management Advisory.
The best example of external auditing services is the services that providing by these big four
Audit firm including KPMG, PWC, EY and Deloitte.
External auditors are normally referring to audit staffs who are working in audit firms. The
Positions are ranking from audit associate, senior auditors to audit partners as well as managing
Partners.
These kinds of firms are sometimes called CPA firms as they required by law to hold a CPA
Qualification/certificate in order to be able to run an audit firm and issue the audit reports.
This type of audit required to maintain the professional code of ethics and strictly follow
International Standards on Auditing and/or local standards as required by local law.
The firms are working independently from auditing clients that they are auditing and if the conflict
Of interest has occurred, proper procedures are needed to take action to minimize the conflicts.
The firm should consider withdrawing from the audit engagement if the impairment could not
Minimize to the acceptable level.
Some external audit firms are also offering internal audit services. The popular services that offer
By external audit firms are an audit of financial statements, tax consultant, and advisory services.
#2: Internal Audit
Internal Auditing is an independence and objectivity consulting service that is designed to add
Value to the business and improve the entity’s operation.
It provides a systematic and disciplined approach to evaluating and assessing the entity’s risk
Management, internal control, and corporate governance.
Scope of internal audit is generally determined by the audit committee, the board of directors or
Directors that have equivalence authorization. And if there is no audit committee and board of
Directors, internal audit normally reports to the owner of the entity.
Internal audit activities are normally covered internal control reviewing, operational reviewing,
Fraud investigation, compliant reviewing, and other special tasks assigned from the audit
Committee or BOD.
, #3: Forensic Audit
The forensic audit is normally performed by a forensic accountant who has the skill in both
Accounting and investigation.
Forensic Accounting is the type of engagement that undertaking the financial investigation in
Response to a particular subject matter, where the findings of the investigation normally are used
as evidence in court or conflict resolution among the shareholders.
The investigation is covering numbers of areas include fraud investigation, crime investigation,
Insurance claims as well as a dispute among shareholders.
A forensic audit is also needed to have a proper plan, procedure, and report like other audit
Engagement.
Related article what are the engagement risks in the audit?
Forensic audit also needs to follow ethical guideline like an audit of financial statements. This kind
Of engagement is not so popular as an audit of financial statements or statutory auditing.
#4: Statutory Audit
Statutory audit is referring to an audit of financial statements for the specific type of entities required by law or
local authority.
For example, all banking sectors required their financial statements to be audited by qualified
Audit firms authorized by their central bank.
The statutory audit might be the difference from financial statements auditing as the financial
Audit is referring to the audit of all types of entity’s financial statements including both meet or not meet the
government’s requirement.
However, statutory audit refers to only auditing of the entity’s financial statements that required by local law.
The statutory audit is normally performed by external audit firms and the audit report will be issued by the
auditor and submit to the government body by the entity.
The best example of the firms that offering statutory auditing is KPMG, PWC, EY, Etc.
The common criteria set by law that required entities to have their financial statements by qualified audit firms
are the amount of annual turnover, the value of assets, and the number of staff the entity employed.
Some countries may require companies in specific industries like banks, minerals, and others based on their
decision to have those company’s financial statements audited.
Companies listed on the stock exchange are generally required and enforce by stock exchange authority to
have qualified audit form audited their financial statements.
#5: Financial Audit
Financial audit refers to the audit of the entity’s financial statements by an independence auditor where audit
opinion will be provided on those financial statements after auditing works are done.
Financial audit normal perform by an external audit firm that holds a CPA and it is normally performed annually
and at the end of the accounting period. This type of audit is also known as financial statements auditing.
But, sometimes as required by management, bank, security exchange, regulation, or else, the financial audit is
also performing on a quarterly as well.
Most of the entity prepares its financial statements based on IFRS, and some entity’s financial statements are
prepared based on local GAAP.
For example, the entity register in the US, their financial statements are prepared based on US
GAAP. If the financial statements are prepared based on IFRS, the financial audit needs to be audit against
IFRS.
However, if the financial statements are prepared based on local GAAP, then the audit needs to be performed
against those local GAAP.
The audit standards that use by the auditor to conduct financial audit need to adopt international standards and
requirement of local law.
Some country requires an audit firm to follow its audit standards while some other countries have adopted the
international standards and transform it to be local.
Overview Types of Audits:
The audit is an art of systematic and independent review and investigation on certain subject
Mater including financial statements, management accounts, management reports, accounting
records, operational reports, revenues reports, and expenses reports, etc.
The result of reviewing and investigation will be reported to shareholders and other key internal
Stakeholders of the entity for their decision making or others purpose as they needed.
Audit reports sometime submit to other stakeholders like government, banks, creditors or public.
For example, the statutory audit report is submitted to the regulator or authority like the tax
Department, the central bank, or the security authority.
The audit is classified into many different types and levels of assurance according to the
Objectives, scopes, purposes, and procedures of how auditing is performed.
The execution of a financial statements auditing is normally in accordance with International
Standards on Auditing (ISA) as well as other local auditing standards.
There are many types of audits including financial audit, operational audit, statutory audit,
Compliance audit and so on.
In this article, we will explain the main 14 types of audits being performed in the current audit
Industry or practices.
Here is the list of 14 Types of Audits and Level of Assurance:
#1: External Audit
The external audit is referring to the audit firms that offer certain auditing services including
Assurance Service, Consultant Service, Tax Consultant Service, Legal Service, Financial Advisory,
And Risk Management Advisory.
The best example of external auditing services is the services that providing by these big four
Audit firm including KPMG, PWC, EY and Deloitte.
External auditors are normally referring to audit staffs who are working in audit firms. The
Positions are ranking from audit associate, senior auditors to audit partners as well as managing
Partners.
These kinds of firms are sometimes called CPA firms as they required by law to hold a CPA
Qualification/certificate in order to be able to run an audit firm and issue the audit reports.
This type of audit required to maintain the professional code of ethics and strictly follow
International Standards on Auditing and/or local standards as required by local law.
The firms are working independently from auditing clients that they are auditing and if the conflict
Of interest has occurred, proper procedures are needed to take action to minimize the conflicts.
The firm should consider withdrawing from the audit engagement if the impairment could not
Minimize to the acceptable level.
Some external audit firms are also offering internal audit services. The popular services that offer
By external audit firms are an audit of financial statements, tax consultant, and advisory services.
#2: Internal Audit
Internal Auditing is an independence and objectivity consulting service that is designed to add
Value to the business and improve the entity’s operation.
It provides a systematic and disciplined approach to evaluating and assessing the entity’s risk
Management, internal control, and corporate governance.
Scope of internal audit is generally determined by the audit committee, the board of directors or
Directors that have equivalence authorization. And if there is no audit committee and board of
Directors, internal audit normally reports to the owner of the entity.
Internal audit activities are normally covered internal control reviewing, operational reviewing,
Fraud investigation, compliant reviewing, and other special tasks assigned from the audit
Committee or BOD.
, #3: Forensic Audit
The forensic audit is normally performed by a forensic accountant who has the skill in both
Accounting and investigation.
Forensic Accounting is the type of engagement that undertaking the financial investigation in
Response to a particular subject matter, where the findings of the investigation normally are used
as evidence in court or conflict resolution among the shareholders.
The investigation is covering numbers of areas include fraud investigation, crime investigation,
Insurance claims as well as a dispute among shareholders.
A forensic audit is also needed to have a proper plan, procedure, and report like other audit
Engagement.
Related article what are the engagement risks in the audit?
Forensic audit also needs to follow ethical guideline like an audit of financial statements. This kind
Of engagement is not so popular as an audit of financial statements or statutory auditing.
#4: Statutory Audit
Statutory audit is referring to an audit of financial statements for the specific type of entities required by law or
local authority.
For example, all banking sectors required their financial statements to be audited by qualified
Audit firms authorized by their central bank.
The statutory audit might be the difference from financial statements auditing as the financial
Audit is referring to the audit of all types of entity’s financial statements including both meet or not meet the
government’s requirement.
However, statutory audit refers to only auditing of the entity’s financial statements that required by local law.
The statutory audit is normally performed by external audit firms and the audit report will be issued by the
auditor and submit to the government body by the entity.
The best example of the firms that offering statutory auditing is KPMG, PWC, EY, Etc.
The common criteria set by law that required entities to have their financial statements by qualified audit firms
are the amount of annual turnover, the value of assets, and the number of staff the entity employed.
Some countries may require companies in specific industries like banks, minerals, and others based on their
decision to have those company’s financial statements audited.
Companies listed on the stock exchange are generally required and enforce by stock exchange authority to
have qualified audit form audited their financial statements.
#5: Financial Audit
Financial audit refers to the audit of the entity’s financial statements by an independence auditor where audit
opinion will be provided on those financial statements after auditing works are done.
Financial audit normal perform by an external audit firm that holds a CPA and it is normally performed annually
and at the end of the accounting period. This type of audit is also known as financial statements auditing.
But, sometimes as required by management, bank, security exchange, regulation, or else, the financial audit is
also performing on a quarterly as well.
Most of the entity prepares its financial statements based on IFRS, and some entity’s financial statements are
prepared based on local GAAP.
For example, the entity register in the US, their financial statements are prepared based on US
GAAP. If the financial statements are prepared based on IFRS, the financial audit needs to be audit against
IFRS.
However, if the financial statements are prepared based on local GAAP, then the audit needs to be performed
against those local GAAP.
The audit standards that use by the auditor to conduct financial audit need to adopt international standards and
requirement of local law.
Some country requires an audit firm to follow its audit standards while some other countries have adopted the
international standards and transform it to be local.
