Primary Types of Audits and Related Reports

There are three primary types of audits:

·         Financial Audit – This is an audit primarily of balance sheets, related statements of income, retained earnings and cash flows.  This type of audit is performed to validate that the financial statements have been prepared in accordance to GAAP.

·         Compliance Audit – This form of audit is to measure the compliance of laws and regulations or policies and procedures.  This type of audit can show whether a tax return is in compliance with tax rules and regulations.  It can also be an audit done to determine if internal controls are being followed.

·         Operational Audit – This form of audit measures performance.  It can be conducted to see how effective or efficient a specific department actually is. 

(Whittington & Pany, 2012)

There is a 4^th type of audit required by public companies in accordance to the Sarbanes-Oxley Act and the PCAOB (Public Company Accounting Oversight Board):

 

·         Integrated Audit – This audit is required of all publicly traded companies.  It is an audit that provides assurance of both the financial statements and the effectiveness of internal controls in financial reporting.  Auditors are required to provide an opinion on both.

(Whittington & Pany, 2012)

There are four types of audit reports:

 

·         Unqualified/Unmodified Opinion – This is the type of report most desired because it reflects that the financial condition and operations were presented fairly and free of material misstatements according to the generally accepted accounting principles.  This type of opinion provides the most reasonable assurance to its users.

·         Qualified Opinion – This report reflects some limitation on the audit but not enough limitation to overshadow an overall opinion on the financial statements.

·         Adverse Opinion – This states that the financial reports are not fairly presented.

·         Disclaimer of Opinion – This report states that the auditor is unable to determine the overall fairness of the financial statements.

(Whittington & Pany, 2012)

 

 

 

Whittington, O. R., & Pany, K. (2012). Principles of Auditing & Other Assurance Services. McGraw Hill .