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What is the difference between an operational audit and a performance audit for an internal audit department?
internal auditors perform an operational audit as part of their assurance services they render to oganisations.
Operational Audits An operational audit is a review of any part of an entity's operating procedures and methods for the purpose of evaluating efficiency and effectiveness. …At the completion of an operational audit, recommendations to management for improving operation are normally expected. An example of an operational audit is evaluating the efficiency and accuracy of processing payroll transactions in a newly installed computer system. Another example, where most accountants would feel less qualified is evaluating the efficiency, accuracy, and customer satisfaction in processing the distribution of letters and parcels by a courier company such as TCS. Because of the many different areas in which operational effectiveness can be evaluated, it is impossible to characterize the conduct of a typical operational audit. In one organization, the auditor might evaluate the relevancy and sufficiency of the information used by management in making decisions to acquire new fixed assets, while in a different organization the auditor might evaluate the efficiency of the paper flow in processing sales. In operational auditing, the reviews are not limited to accounting. They can include the evaluation of organization structure, computer operations, production methods, marketing, and any other area in which the auditor is qualified. The conduct of an operational audit and the reported results are less easily defined than for either of the other two types of audits. Efficiency and effectiveness of operations are far more difficult to evaluate objectively than compliance or the presentation of financial statements in accordance with accounting conventions and principles; and establishing criteria for evaluating the quantifiable information in an operational audit is an extremely subjective matter. In this sense, operational auditing is more like "management consulting" than what is generally regarded as "auditing". Operational auditing has increased in importance in the past decade. Compliance Audits The purpose of a compliance audit is to determine whether the entity is following specific procedures, rules, or regulations set down by some higher authority. A compliance audit for a private business could include determining whether accounting personnel are following the procedures prescribed by the company controller, reviewing wage rates for compliance with minimum wage laws, or examining contractual agreements with bankers and other lenders to be sure the company is complying with legal requirements. In the audit of governmental units such as districts school, there is extensive compliance auditing due to extensive regulation by higher government authorities. In virtually every private and non profit organization, there are prescribed policies, contractual agreements, and legal requirements that may call for compliance auditing. Results of compliance audits are typically reported to someone within the entity being audited rather than to a broad spectrum of users. Management, as opposed to outside users, is the primary group concerned with the extent of compliance with certain prescribed procedures and regulations. Hence, a significant portion of work of this type is done by auditors employed by the entity itself. There are exceptions; when an organization wants to determine whether individuals or entities that are obligated to follow its requirements are actually complying, the auditor is employed by the entity issuing the requirements. An example is the auditing of taxpayers for compliance with the federal tax laws, where the auditor is employed by the government to audit the taxpayers' tax returns. Following table summarizes the three types of audits and includes an example of each type and an illustration of three of the key parts of the definition of auditing applied to each type of audit. for more study Examples of the Three Types of Audits
An internal audit is done by the company itself. An external audit is done by auditors not under the influence of the company being audited.
A risk base internal audit is latest approach to ensure best practices aiming at maximizing the impact of audit by focusing on the major strategy ,regulatory, financial and op…eration risk that confront an organization while internal audit is traditional independent examination of financial and operation of an organization to ensure economic,effective and efficiency utilization of an organizations resources
The MetricStream's Internal Audit Management solution is a comprehensive application designed to help companies manage a wide range of audit-related programs, data and pro…cesses. It provides flexibility to support all types of audits - internal audits, operational audits, IT audits, supplier audits and quality audits. The solution provides end-to-end functionality for managing the complete audit lifecycle including risk assessment, audit planning and scheduling, development of standard audit plans and checklists, field data collection, development of audit reports and recommendations, review of audit recommendations by auditees and management and implementation of audit recommendations and remediation.
Concurrent audit is that which keep continuous during whole operating year while internal audit is conducted by inernal audit departments for different purpose and with di…fferent audit scope.
Distinguish between internal audit and internal control.
difference between internal audit and interim audit
An internal audit is conducted by the organization itself or a firm hired by them; it is a self examination. An external audit is done by an outside agency that reports to the… firm's stockholders, or to another party, such as a business, a bank, or the IRS. An external audit is usually from an outside auditing company like Deloitte & Touche, Ernst & Young, etc. These companies will visit the client company for a designated period to review the books. An internal audit is usually done by employees within a company. This is to maintain controls and prevent any mistakes. An internal audit is done by the company itself. An external audit is done by auditors not under the influence of the company being audited.
1) An internal audit is an appraisal of activities within company areas, whereas an external audit looks at the financial statements as a whole 2) An internal report is norma…lly given to managers, while an external report is prepared for shareholders, related companies, creditors, or government agencies.
Internal audit requires to ensure that internal controls inorganization works properly while the sole purpose for extrnalaudit is to check whether financial statements represe…nts true andfair business activities.
An Internal audit is performed by employees of your own company, usually by employees who are subject matter experts. Internal audit results are usually taken under considerat…ion by management and improvements are made by the company in order to avoid an external audit finding which may result in the risk of citation or fine. An external statutory audit would be performed by and auditor who is employed by the government (local, state, or federal). The external auditors findings are legal and binding and may lead to citations or fines or both.
Internal audit report is generated by internal audit department of business which mainly focuses on all operations and effectiveness and effeciancy of operations while ext…ernal audit report is generated by external auditors which has only one point agenda to determine that books of accounts presents the true and fair nature of business transactions.
In Tax Audits
Internal audit is the name of department who performs the auditwhile interim audit is the audit which other than statutary auditand it is perform during the fiscal year and it… is performed tohelp the final audit procedures which is done after the completionof fiscal year.
internal control is the prevents the errors. whereas an internal audit is to detect the errors and frauds.
The international accounting standards are standards to which the accounting procedures for organisations must comply with. It specifically relates to the preparation of repor…ting, such as the preparation of the financial statement, cash flow statement and the balance sheet. Auditors are professionals who analyse whether the organisation has prepared all the statements in accordance with the accounting standards, and any errors are reported to the related governing body, which in Australia is ASIC. For more details, please look up the Corporations Act which has a large section related to financial statements and auditors.
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