Auditing focuses on evaluating the effectiveness of a company’s internal controls. Maintaining an effective system of internal controls is crucial for gaining an objective of the company’s business, acquiring reliable financial reporting on its operations, preventing fraud and misappropriation of its assets and lessening its capital cost. Both independent and internal auditors contribute to a company’s audit system in various but essential ways. The purpose of the Audit will depend on the nature of the organization as also on the type that is to be performed. There are various audits in Dubai, which provides prevention from fraud and detection, assess risk management.
Classification of Audit
The Audit is performed in an organization is divided into various categories. It can be classified as an internal or external audit, and the division will depend on the interrelations that are formed between the participants. The employees themselves accomplish the internal Audit while the external Audit is the one that is executed with the help of a third party.
Here are the three main types of audits.
Process Audit
This is a type of Audit in which the processes of working in a particular organization are examined. Through this Audit, the evaluation of how specific tasks are performed is reviewed.
Their compliance with the specific standards is also examined. For example, a process audit may also aim at how the control of standards is established in various sectors of the organization.
Product Audit
It is a simple form of Audit in which the examination of the product is performed to check its conformity with the requirements. For example, a hardware device is audited to its performance level, specifications, the standards which were utilized in the process of manufacturing and the needs of the customers.
System Audit
A system audit is a type of Audit that is conducted to assess system performance. The process is carried out with the whole new level objectivity involving the evaluation of different elements of the system and evidence. The system audit has two different types of Audit.
The first one is a quality management system audit that evaluates the quality of an existing system and its conformity to the particular standards.
The second one is an environmental system audit in which the environmental management systems like food safety system audits are executed. These are three basic types of an audit that are being carried out in the organization of Dubai. The kind of Audit that is to be done will rely on the nature of the organization. Moreover, apart from the types mentioned above, the Audit is also done in the form of external and internal, which includes three different stages of the Audit.
The first stage audit is performed by the employees of the organization to look at the standards of the procedures that are being performed. The second stage audit is done by the supplier or the finally and customers.
Importance of an Audit System to Companies
Enables the tracking of Business Objectives
Having an effective audit system is essential for a company because it allows it to pursue and attain its different corporate objectives.
Business processes need a variety of internal control to escalate supervision and monitoring, detect and prevent irregular transactions, measure ongoing performance, to maintain records and to improve productivity.
Capital Cost
The Capital cost is vital for every company irrespective of the size. Cost of Capital is comprised of the risk along with an investment, and if an investment has more chance, an investor will need a higher rate of return to invest.
Fraud Detection and Prevention
Internal Audit provides an essential role for companies in fraud prevention. Analysis of the company’s maintaining and company’s operations system of internal controls can detect and prevent other accounting irregularities and different kind of fraud.
