Question

"Audits may be characterized as (a) financial statement audits, (b) compliance audits, or (c) operational audits"

Answer 1

Answer:

Audit is an independent examination of records,financial statements or process in order to give report to the party that has commissioned the audit

Explanation:

Audit can be of the three types highlighted in the question.

Audit of financial statements involves an external auditor examining the financial statements of clients i.e the income statement,statement of financial position.the cash flow statement as well statement of changes in equity e.t.c with a view to expressing an opinion on whether the financial statements show a true and fair view of the performance of the organisation audited and sometimes whether they were prepared in line with generally accepted accounting standards such as US GAAP.

Compliance audit is simply to find out whether the person audited has conformed with certain laid down policies and procedures such as the policies to follow in granting credit facilities to bank customers.

Process audit is about examining a process to see if the steps taken by the person carrying the tasks are logical and to find out areas for improvement in order to cut down time and resources used.