The general definition of an audit is an evaluation of a person, organization, system, process, enterprise, project or product. The term most commonly refers to audits in accounting, but similar concepts also exist in project management, quality management, and energy conservation.

Accounting

Audits are performed to ascertain the validity

Validity (statistics)

In science and statistics, validity has no single agreed definition but generally refers to the extent to which a concept, conclusion or measurement is well-founded and corresponds accurately to the real world. The word "valid" is derived from the Latin validus, meaning strong...

 and reliability

Reliability (statistics)

In statistics, reliability is the consistency of a set of measurements or of a measuring instrument, often used to describe a test. Reliability is inversely related to random error.-Types:There are several general classes of reliability estimates:...

 of information; also to provide an assessment of a system's internal control

Internal control

In accounting and auditing, internal control is defined as a process effected by an organization's structure, work and authority flows, people and management information systems, designed to help the organization accomplish specific goals or objectives. It is a means by which an organization's...

. The goal of an audit is to express an opinion of the person / organization / system (etc.) in question, under evaluation based on work done on a test basis.

Due to constraints, an audit seeks to provide only reasonable assurance that the statements are free from material error. Hence, statistical sampling is often adopted in audits. In the case of financial audit

Financial audit

A financial audit, or more accurately, an audit of financial statements, is the verification of the financial statements of a legal entity, with a view to express an audit opinion...

s, a set of financial statements

Financial statements

A financial statement is a formal record of the financial activities of a business, person, or other entity. In British English—including United Kingdom company law—a financial statement is often referred to as an account, although the term financial statement is also used, particularly by...

 are said to be true and fair when they are free of material misstatements - a concept influenced by both quantitative

Numerical data

Numerical data is data measured or identified on a numerical scale. Numerical data can be analyzed using statistical methods, and results can be displayed using tables, charts, histograms and graphs. For example, a researcher will ask a questions to a participant that include words how often, how...

 (numerical) and qualitative factors.But recently, argument that auditing should go beyond just True and fair is gaining momentum. And PCAOB has came out with a concept release on the same.

Auditing is a vital part of accounting. Traditionally, audits were mainly associated with gaining information about financial systems and the financial records of a company or a business (see financial audit

Financial audit

A financial audit, or more accurately, an audit of financial statements, is the verification of the financial statements of a legal entity, with a view to express an audit opinion...

). However, recent auditing has begun to include non-financial subject areas, such as safety, security, information systems performance, and environmental concerns. With nonprofit organizations and government agencies, there has been an increasing need for performance audit

Performance audit

Performance audit refers to an examination of a program, function, operation or the management systems and procedures of a governmental or non-profit entity to assess whether the entity is achieving economy, efficiency and effectiveness in the employment of available resources...

s, examining their success in satisfying mission objectives. As a result, there are now audit professionals who specialize in security audits, information systems audits, and environmental audits

Environmental audits

Environmental audit is a general term that can reflect various types or evaluations intended to identify environmental compliance and management system implementation gaps, along with related corrective actions. In this way they perform an analogous function to financial audits...

.

In cost accounting

Cost accounting

Cost accounting information is designed for managers. Since managers are taking decisions only for their own organization, there is no need for the information to be comparable to similar information from other organizations...

, it is a process for verifying the cost of manufacturing or producing of any article, on the basis of accounts measuring the use of material, labour or other items of cost. In simple words the term, cost audit, means a systematic and accurate verification of the cost accounts and records, and checking for adherence to the cost accounting objectives. According to the Institute of Cost and Management Accountants of Pakistan, a cost audit is "an examination of cost accounting records and verification of facts to ascertain that the cost of the product has been arrived at, in accordance with principles of cost accounting."

An audit must adhere to generally accepted standards established by governing bodies. These standards assure third parties or external users that they can rely upon the auditor's opinion on the fairness of financial statements, or other subjects on which the auditor expresses an opinion.

The Definition for Audit and Assurance Standard AAS-1 by the Institute of Chartered Accountants of India

Institute of Chartered Accountants of India

The Institute of Chartered Accountants of India is a national professional accounting body of India. It was established on 1 July 1949 as a body corporate under the Chartered Accountants Act, 1949 enacted by the Constituent Assembly of India to regulate the profession of Chartered Accountancy in...

(ICAI) - "Auditing is the independent examination of financial information of any entity, whether profit oriented or not, and irrespective of its size or legal form, when such an examination is conducted with a view to expressing an opinion thereon."

Integrated audits

In the US, audits of publicly traded companies are governed by rules laid down by the Public Company Accounting Oversight Board

Public Company Accounting Oversight Board

The Public Company Accounting Oversight Board is a private-sector, non-profit corporation created by the Sarbanes–Oxley Act, a 2002 United States federal law, to oversee the auditors of public companies. Its stated purpose is to 'protect the interests of investors and further the public interest...

 (PCAOB), which was established by Section 404 of the Sarbanes-Oxley Act

Sarbanes-Oxley Act

The Sarbanes–Oxley Act of 2002 , also known as the 'Public Company Accounting Reform and Investor Protection Act' and 'Corporate and Auditing Accountability and Responsibility Act' and commonly called Sarbanes–Oxley, Sarbox or SOX, is a United States federal law enacted on July 30, 2002, which...

 of 2002. Such an audit is called an integrated audit, where auditors, in addition to an opinion on the financial statements, must also express an opinion on the effectiveness of a company's internal control over financial reporting, in accordance with PCAOB Auditing Standard No. 5.

There are also new types of integrated auditing becoming available that use unified compliance material (see the unified compliance section in Regulatory compliance

Regulatory compliance

In general, compliance means conforming to a rule, such as a specification, policy, standard or law. Regulatory compliance describes the goal that corporations or public agencies aspire to in their efforts to ensure that personnel are aware of and take steps to comply with relevant laws and...

). Due to the increasing number of regulations and need for operational transparency, organizations are adopting risk-based audits that can cover multiple regulations and standards from a single audit event. This is a very new but necessary approach in some sectors to ensure that all the necessary governance

Governance

Governance is the act of governing. It relates to decisions that define expectations, grant power, or verify performance. It consists of either a separate process or part of management or leadership processes...

 requirements can be met without duplicating effort from both audit and audit hosting resources.

Assessments

The purpose of an assessment is to measure something or calculate a value for it. Although the process producing an assessment may involve an audit by an independent professional, its purpose is to provide a measurement rather than to express an opinion about the fairness of statements or quality of performance.

As a general rule, audits should always be an independent evaluation that will include some degree of quantitative and qualitative analysis whereas an assessment infers a less independent and more consultative approach.

Auditors

Auditors of financial statements can be classified into two categories:

• External auditor / Statutory auditor
  Statutory auditor
  A is an official found in Japanese kabushiki kaisha .Statutory auditors are elected by shareholders and hold a position in the hierarchy alongside the board of directors. A kabushiki kaisha must have at least one statutory auditor, unless the transfer of shares is restricted in the articles of...
  
   is an independent firm engaged by the client subject to the audit, to express an opinion on whether the company's financial statements
  Financial statements
  A financial statement is a formal record of the financial activities of a business, person, or other entity. In British English—including United Kingdom company law—a financial statement is often referred to as an account, although the term financial statement is also used, particularly by...
  
   are free of material misstatements, whether due to fraud or error. For publicly-traded companies, external auditors may also be required to express an opinion over the effectiveness of internal controls over financial reporting. External auditors may also be engaged to perform other agreed-upon procedures, related or unrelated to financial statements. Most importantly, external auditors, though engaged and paid by the company being audited, are regarded as independent auditors.

The most used external audit standards are the US GAAS

Gaas

Gaas is a commune in the Landes department in Aquitaine in south-western France....

 of the American Institute of Certified Public Accountants

American Institute of Certified Public Accountants

Founded in 1887, the American Institute of Certified Public Accountants is the national professional organization of Certified Public Accountants in the United States, with more than 370,000 CPA members in 128 countries in business and industry, public practice, government, education, student...

; and the ISA International Standards on Auditing

International Standards on Auditing

International Standards on Auditing are professional standards for the performance of financial audit of financial information. These standards are issued by International Federation of Accountants through the International Auditing and Assurance Standards Board .-Respective responsibilities:*ISA...

 developed by the International Auditing and Assurance Standards Board

International Auditing and Assurance Standards Board

The International Auditing and Assurance Standards Board is the independent standard setting body which issue auditing, review, other assurance related services and quality control standards to be applied by the global auditing profession...

 of the International Federation of Accountants

International Federation of Accountants

International Federation of Accountants is the global organization for the accountancy profession. IFAC has 164 member and associates in 124 countries and jurisdictions, representing more than 2.5 million accountants employed in public practice, industry and commerce, government, and academe...

• Internal auditors are employed by the organization they audit. They perform various audit procedures, primarily related to procedures over the effectiveness of the company's internal controls over financial reporting. Due to the requirement of Section 404 of the Sarbanes Oxley Act of 2002 for management to also assess the effectiveness of their internal controls over financial reporting (as also required of the external auditor), internal auditors are utilized to make this assessment. Though internal auditors are not considered independent of the company they perform audit procedures for, internal auditors of publicly-traded companies are required to report directly to the board of directors
  Board of directors
  A board of directors is a body of elected or appointed members who jointly oversee the activities of a company or organization. Other names include board of governors, board of managers, board of regents, board of trustees, and board of visitors...
  
  , or a sub-committee of the board of directors
  Board of directors
  A board of directors is a body of elected or appointed members who jointly oversee the activities of a company or organization. Other names include board of governors, board of managers, board of regents, board of trustees, and board of visitors...
  
  , and not to management
  Management
  Management in all business and organizational activities is the act of getting people together to accomplish desired goals and objectives using available resources efficiently and effectively...
  
  , so to reduce the risk that internal auditors will be pressured to produce favorable assessments.

The most used Internal Audit standards are those of the Institute of Internal Auditors

Institute of Internal Auditors

Established in 1941, The Institute of Internal Auditors is a guidance-setting body. Serving members in 165 countries, The IIA is the internal audit profession's global voice, chief advocate, recognized authority, and principal educator, with global headquarters in Altamonte Springs, Fla., United...

• Consultant
  Consultant
  A consultant is a professional who provides professional or expert advice in a particular area such as management, accountancy, the environment, entertainment, technology, law , human resources, marketing, emergency management, food production, medicine, finance, life management, economics, public...
  
   auditors are external personnel contracted by the firm to perform an audit following the firm's auditing standards
  Auditing Standards Board
  In the United States, the Auditing Standards Board is the senior technical committee designated by the American Institute of Certified Public Accountants to issue auditing, attestation, and quality control statements, standards and guidance to certified public accountants for non-public company...
  
  . This differs from the external auditor, who follows their own auditing standards. The level of independence is therefore somewhere between the internal auditor and the external auditor. The consultant auditor may work independently, or as part of the audit team that includes internal auditors. Consultant auditors are used when the firm lacks sufficient expertise to audit certain areas, or simply for staff augmentation when staff are not available.

• Quality auditors
  Quality audit
  Quality audit is the process of systematic examination of a quality system carried out by an internal or external quality auditor or an audit team...
  
   may be consultants or employed by the organization.

Quality audits

Quality audits are performed to verify conformance to standards through review of objective evidence. A system of quality audits may verify the effectiveness of a quality management system. This is part of certifications such as ISO 9001. Quality audits are essential to verify the existence of objective evidence showing conformance to required processes, to assess how successfully processes have been implemented, for judging the effectiveness of achieving any defined target levels, providing evidence concerning reduction and elimination of problem areas and are a hands-on management tool for achieving continual improvement in an organization.

To benefit the organization, quality auditing should not only report non-conformance and corrective actions but also highlight areas of good practice and provide evidence of conformance. In this way, other departments may share information and amend their working practices as a result, also enhancing continual improvement.

Project Management

Projects can undergo 2 types of audits:

• Regular Health Check Audits: The aim of a regular health check audit is to understand the current state of a project in order to increase project success.
• Regulatory Audits: The aim of a regulatory audit is to verify that a project is compliant with regulations and standards. Best practices of NEMEA Compliance Center describe that, the regulatory audit must be accurate, objective, and independent while providing oversight and assurance to the organization.

Energy audits

An energy audit is an inspection, survey and analysis of energy

Energy

In physics, energy is an indirectly observed quantity. It is often understood as the ability a physical system has to do work on other physical systems...

 flows for energy conservation

Energy conservation

Energy conservation refers to efforts made to reduce energy consumption. Energy conservation can be achieved through increased efficient energy use, in conjunction with decreased energy consumption and/or reduced consumption from conventional energy sources...

 in a building, process or system to reduce the amount of energy input into the system without negatively affecting the output(s).

See also

• Accounting
• Big Four auditors
  Big Four auditors
  The Big Four are the four largest international professional services networks in accountancy and professional services, which handle the vast majority of audits for publicly traded companies as well as many private companies, creating an oligopoly in auditing large companies...
  
  
• Comptroller
  Comptroller
  A comptroller is a management level position responsible for supervising the quality of accounting and financial reporting of an organization.In British government, the Comptroller General or Comptroller and Auditor General is in most countries the external auditor of the budget execution of the...
  
  , Comptroller General, and Comptroller General of the United States
  Comptroller General of the United States
  The Comptroller General of the United States is the director of the Government Accountability Office , a legislative branch agency established by Congress in 1921 to ensure the fiscal and managerial accountability of the federal government...
  
  
• Continuous auditing
  Continuous auditing
  Continuous auditing is the independent application of automated tools to provide assurance on financial, compliance, strategic and operational data within a company. Continuous auditing uses a set of tools to assure the internal control system is functioning to prevent fraud, errors and waste...
  
  
• COSO framework, Risk management
  Risk management
  Risk management is the identification, assessment, and prioritization of risks followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events or to maximize the realization of opportunities...
  
  
• EarthCheck
• Field work
• Financial audit
  Financial audit
  A financial audit, or more accurately, an audit of financial statements, is the verification of the financial statements of a legal entity, with a view to express an audit opinion...
  
  , External auditor, Certified Public Accountant
  Certified Public Accountant
  Certified Public Accountant is the statutory title of qualified accountants in the United States who have passed the Uniform Certified Public Accountant Examination and have met additional state education and experience requirements for certification as a CPA...
  
   (CPA), and Audit risk
  Audit risk
  Audit risk refers to acceptable audit risk, i.e. it indicates the auditor's willingness to accept that the financial statements may be materially misstated after the audit is completed and an unqualified opinion was issued...
  
  
• Green Globe
  Green Globe
  Green Globe is based on Agenda 21 principles for Sustainable Development endorsed by 182 Heads of State at the United Nations Rio De Janeiro Earth Summit . Green Globe Certification and Green Globe Asia Pacific deliver separate certification services and standards to the travel & tourism as well...
  
  
• Independent review
  Independent review
  Independent review is the practice of having an expert, but independent evaluation of a set of results or artifacts produced by an author or organization. The practice appears in a large number of fields, including science, engineering, public policy, finance, medical practice, etc. In science, the...
  
  
• Information technology audit
  Information technology audit
  An information technology audit, or information systems audit, is an examination of the management controls within an Information technology infrastructure. The evaluation of obtained evidence determines if the information systems are safeguarding assets, maintaining data integrity, and operating...
  
  , Information technology audit process
  Information technology audit process
  Information technology audit process:-Generally Accepted Auditing Standards :In 1947, the American Institute of Certified Public Accountants adopted GAAS to establish standards for audits...
  
  , History of information technology auditing
  History of information technology auditing
  Information Technology Auditing began as Electronic Data Process Auditing and developed largely as a result of the rise in technology in accounting systems, the need for IT control, and the impact of computers on the ability to perform attestation services...
  
  , and Auditing information security
  Auditing information security
  An information security audit is an audit on the level of information security in an organization. Within the broad scope of auditing information security there are multiple types of audits, multiple objectives for different audits, etc. Most commonly the controls being audited can be categorized...
  
  
• Internal audit
  Internal audit
  Internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization's operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk...
  
  
• INTOSAI (International Organization of Supreme Audit Institutions)
• Lead Auditor
  Lead Auditor
  Most Publicly-traded corporations typically have an internal auditing department, led by a Chief Audit Executive , with lead internal auditors managing small teams of internal auditors for one audit engagement...
  
  , under the Chief Audit Executive
  Chief Audit Executive
  The Chief Audit Executive , Director of Audit, Director of Internal Audit, Auditor General, or Controller General is a high level independent corporate executive with overall responsibility for the Internal audit....
  
  , or Director of Audit
  Chief Audit Executive
  The Chief Audit Executive , Director of Audit, Director of Internal Audit, Auditor General, or Controller General is a high level independent corporate executive with overall responsibility for the Internal audit....
  
  
• Quality audit
  Quality audit
  Quality audit is the process of systematic examination of a quality system carried out by an internal or external quality auditor or an audit team...