A PRESENTATION ON THE TOPIC

“AUDITING”
 MEANING:
Audit is the examination and verification of
records and other evidences by an individual or a

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body of persons so as to confirm whether the
records and other evidences present a true and fair
picture of whether they are supposed to reflect.
There are two types of Audit:
 Financial audit.
 Non- Financial audit.

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 BENEFITS OF AUDIT:
Audit yields multiple benefits. Some of these
benefits are the following:

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 Identify opportunities for improvement.

 Reality check.

 Identify outdated strategies.

 Increase management’s ability to address

concerns.
 Enhances teamwork.

 Increase commitment to changes.

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 FINANCIAL AND NON-FINANCIAL AUDIT
Financial audit
 Relies primarily on
standards set externally.
 Procedures are formulized
and consistent from
company to company.
Compliance with
procedures adds credibility
to the audit.
Non- Financial audit
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 Relies primarily on
standards set internally on
the basis of customers and
competitor information.
 Procedures are fluid and
should be adapted by each
company. Measures should
be created that suit the
company’s needs.
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CONTD..
Financial
 Standards are essentially
the same from audit to
audit.
 Focus is on complying with
standards set by external
groups.
 Audience is often primarily
external, with audit used as
a way of building credibility.
Non- Financial
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 Standards should change
as performance improves.
 Focus is on exceeding
standards set internally or
by industry competitors.
 Audience is generally
internal, with data being
used primarily to improve
performance.
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CONTD..
Financial Non- Financial

 Generally conducted yearly.
 Focuses on measures that
effect only financial
performance.
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 Conducted on average,
every 18 to 24 months.
 Focuses on a broad range
of functions that contribute
to the success of functions
that contribute to the
success or failure of a
particular process.

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 LIMITATIONS OF AUDIT
 It can neither help in prioritizing changes nor in
allocating resources.

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 Audit cannot mobilize people to take action.

 Audit cannot generate better data than the

measures used to gather those.
 An audit, by itself cannot improve performance.

 An audit should not be used for wrongful purposes.

It should not be used for personal indictment and to
justify improve actions.

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 AUDIT PROCESS:
An audit process consists of following stages:
 Staffing the audit team.

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 Creating an audit project plan.

 Laying the groundwork for the audit.

 Analyzing audit results.

 Sharing audit results.

 Writing audit reports.

 Dealing with resistance to audit recommendations.

 Building an ongoing audit program.

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 STAFFING THE AUDIT TEAM:

An audit team should consist of people who

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have substantial knowledge of systems and
processes within the company. An audit team
should consist of people who have knowledge in
diverse areas.

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 Some other aspects that should be considered are:
 Team should consist of newcomers as well as
experienced people.
 Importance is given to people who is more experienced

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in auditing.
 Functional expert should be included in the audit team.
 The person who are closely associated should with the
process should be included in the audit team.
 Team members should possess strong analytical and
interpersonal skills.
 Understanding of company’s overall strategy and its
goals and objectives.

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 CREATING AN AUDIT PROJECT PLAN
An audit plan helps in better allocation of
resources, especially if the resources are scarce. It

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makes sure that audit tasks are completed on time.
It also ensures accountability and responsibility of
the management by clearly stating what is to be
done, who is responsible for which task and when
the audit should be completed.

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 LAYING THE GROUND WORK FOR THE AUDIT
The following steps will help an audit run
smoothly:

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 Gathering executive support.

 Make arrangements with the area being audited.

 Develop a checklist.

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 ANALYZING AUDIT RESULTS

When the audit is completed, the gaps

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between a company’s targets and its actual
performance can be identified. These gaps usually
perform to specific areas in the various functions of
the management. The audit results identify the
opportunities for improvement, but arranging the
areas in terms of importance is a difficult task.

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 SHARING AUDIT RESULTS
The audit results are pressurized before the
members of the executive team, the managers who

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work in the area covered by the audit, the audit
team members and anyone else who is affected by
the audit or is interested in the results, in a
feedback meeting. The audit team’s objective
during the meeting is to present a clear and simple
picture of the current situation, as revealed by the
audit.

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 WRITING AUDIT REPORTS
 After the audit work is completed, the whole
process of auditing, the resultant findings and

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recommendations are written in a formal report
canned an Audit Reports.
 An audit report may be a plain summary of the
audit. But such a report is not recommended
because the probability of taking action in this case
is less.
 An audit report serves as a baseline document for
measuring improvement in performing possible in
future audits.
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 DEALING WITH RESISTANCE TO AUDIT
RECOMMENDATIONS

The audit team gives its recommendations

when the audit is completed. These

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recommendations may not be always accepted,
especially when they require people to change their
way of working.

Types of resistance:
 Direct resistance to audit recommendations.

 Indirect resistance to audit recommendations.

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 BUILDING AN ONGOING AUDIT PROGRAM

It helps in monitoring improvement

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performance over a specified period of time. They
help in systematically monitoring the changes
taking place in the company’s work environment
and also help managers deal with resistance to
change.

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 AUDIT TOOLS AND TECHNIQUES:
 Budget.
 Timing.

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 Projectability.

 Geography.

 Surveys.

 Questionnaires.

 Focus groups.

 Interviews.

 Direct observations.

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 MANAGEMENT AUDIT:
A management audit is defined as “an examination
of the conditions and a diagnosis of deficiencies with
recommendations for correcting them.”
As per John C. Burton, “in a management audit,

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the auditor will see the management is getting
information relevant to the decisions and actions which it
must take. This will require a much more intensive
analysis of information needs and the efficiency of the
existing system in meeting them. The auditor will not
have to decide whether management is making the right
strategic and operative decisions but rather whether the
management has available to it and is using the relevant
information and techniques necessary to evaluate the
various alternatives that exist.”
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 OBJECTIVES OF MANAGEMENT AUDIT:
 To critically analyze and evaluate management
performance.

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 To detect and overcome existing management
deficiencies and resulting operational problems.
 To evaluate the methods and processes used by
the management to accomplish its organizational
objectives.
 It helps to determine the effectiveness of the
management in PODC the organization’s activities.
 It helps to ascertain the appropriateness of the
management’s decisions for achieving the
organization objectiveness.
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 TYPES OF MANAGEMENT AUDIT:
 Complete management audit.
 Compliance management audit.

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 Program management audit.

 Functional management audit.

 Efficiency management audit.

 Propriety audit.

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 COMPLETE MANAGEMENT AUDIT
 Complete management audit evaluates the firm’s
current activities and measures the gaps between

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its existing policies and the objectives, and its
actual activities.
 Complete management audit is however, not
designed to punish the inefficient or reprimand
people who make honest mistakes.

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 COMPLIANCE MANAGEMENT AUDIT
 Auditors are asked to identify the gaps between the
company’s existing policies and objectives, and its

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actual practice. However, in this case, the auditors
do not make any recommendations for
improvements.
 They simply present their observations to the top
management. The top management consults to
personnel to decide whether, what, or how
corrective action should be taken

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 PROGRAM MANAGEMENT AUDIT
Program management audit is similar to
complete management audit and compliance

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management audit; the only difference is being the
fact that it focuses on a specific program. Program
management audit is designed to appraise
performance within a specified program and it
doesn’t disturb other operations of the firm.

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 FUNCTIONAL MANAGEMENT AUDIT

Functional management measures the

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difference between the actual performance of an
organization and its objectives, with emphasis on a
particular function.

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 EFFICIENCY AUDIT
Efficiency audit is conducted to ensure that
money is so utilized as to generate handsome

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returns.

The objectives of efficiency audit are:

 To invest the capital in areas that generate optimum
returns.
 To plan and invest judiciously in various functions.

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 PROPRIETY AUDIT
Propriety audit is conducted to examine the
effect of the management’s decisions and actions

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on the society and the public. While conducting the
audit, the auditor examines all transactions of the
company to find out whether any of the transactions
has negatively affected public interests.

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 ORGANIZING THE MANAGEMENT AUDIT
 Devising the statement of policy.
 Allocation of personnel.

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 Staff training program.

 Time and other aspects.

 Frequency.

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 INTERNAL AUDIT
o Traditional perspective.
o Modern perspective.

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Roles:
 Check whether the existing controls are effective
and adequate.
 Check whether the financial reports and other
records show the actual results of the company.
 Check whether the sub-units of the organization
laid down by the management
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 SOCIAL AUDIT:

Blake, Fredrick and Myers define social audit

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as, “an systematic attempt to identify, analyze,
measure, evaluate and monitor the effect of an
organization’s operations on society.”

Social audit has been often used wrongly to

mean activities pertaining to a company’s social
programs, social surveys, etc.

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 FEATURES OF SOCIAL AUDITS:
 Social audits adhere to the specified norms. These
norms may adhere to the government’s standards

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of social performance, standards established by the
organization and norms set by outside agencies.
 The aim of conducting a social audit is to influence
the policies, objectives and actions of the
concerned organization to improve its social
performance.
 Social audit is conducted by professionals who
have knowledge about the social area being
audited.
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 TYPES OF SOCIAL AUDIT
 Social balance sheet and income statement.
 Social performance audits.

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 Macro- micro social indicator audits.

 Constituency group attitudes audits.

 Government mandated audits.

 Social process or program audits.

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 AUDIT EVIDENCE
 Persuasive.
 Relevant.

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 Unbiased.

 Objective.

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 APPROACHES TO SOCIAL AUDIT:
 Inventory approach.
 Program management approach.

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 Cost-benefit approach.

 Social indicator approach.

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