Whenever we think of auditing, we tend to focus on financial audit, internal audit or cost auditing. However, there are various other forms of audits which occur in the economy. Some of these are very crucial for the existence of the organization. Some such audits are – bank audit, tax audit, insurance audit etc. Let us take a look.
Types of Audit
- Tax Audit
- Bank Audit
- Insurance Audit
- Government Audit
- Management Audit
In India, all businesses have to pay a direct tax to the central authorities if they fall in the tax slab. The rules regarding tax and tax payments are in the Income Tax Act, 1961. Section 44AB of this Act provides for a compulsory tax audit of certain assesses.
This is done to ensure to the tax authorities that the financial records submitted are reliable and the tax liability is calculated correctly. The authorities also rely on a tax audit to ensure that the deductions are taken, exemptions prevailed etc are also lawful.
So if the turnover of an organization is over a certain prescribed limit or if they are claiming certain deductions or filling their tax returns under cert ion sections or provisions they may have to compulsorily go under tax audit by a certified Chartered Accountant.
Banks are the cornerstone of our economy. They handle huge amounts of public deposits and savings, so they have to be closely monitored and reviewed. A bank audit is one important process of this monitoring.
An auditor carrying out this bank audit have to verify the financial statements of such a banking institution. They have to ensure that the final accounts truly represent the financial position and condition of the bank.
Other than this, there are other special transactions that a bank audit must cover. These include the provisions for NPA’s (non-performing assets), maintaining credit ratios, fulfilling RBI’s statutory requirements etc.
Just like a bank audit, an insurance audit is also important since insurance companies are providing a public service. Again the auditor will check for financial accuracy of their accounting records.
They will also ensure that customers have paid an appropriate premium for their insurance coverage. He will ensure the company follows all rules laid out in the Insurance Regulatory and Development Act of 1999.
Learn more about Internal Audit here in detail.
Just like companies, organizations, institutions etc. the government also goes through an audit. Both the Central Government and the State Government are audited. The responsibility of this falls on the Comptroller and Auditor General of India (C&AG).
C&AG ensures that the financial transactions of the government are executed correctly and have the proper authorization. The focus is mainly on the expenditures done by both governments. Also, government audits will include an audit of government and public companies as per the provisions of the Companies Act 2013.
Management audit is a relatively new concept that originated in the USA. The main objective of such an audit is to help the company maximize their profits by improving their efficiency and time management.
It involves auditing the functioning of all the departments to find gaps in performance and efficiency. These are then passed on to the management so that they can make the necessary changes.
Solved Questions for You
Q: What is the necessity of a co-operative society audit?
Ans: Like companies, co-operative societies also have a separation of ownership and management. So to ensure the members of the society of the smooth functioning and the true and fair representation of their financial status and affairs, a co-operative society audit is necessary,