Types Of Audit

CLASSIFICATION BY ORGANISATION: The greater part of the audit work of the professional accountants are related to the periodical of :

  1. Sole trader.
  2. Partnership.
  3. Limited companies.
  4. Companies established by speacial decrees, Acts or Statutes.


This audit is not statutory, as result the rights and duties of an auditor in the type of organisation are not cleary defined and depend upon the wishes of the sole trader.


  1. Valuable suggestion with regard to system of control and accounting in use may sought from the auditor.
  2. Ideas or ways of financing the business can be gained from him.
  3. Income tax returns preparation is facilitated.
  4. Sales of the business is rendered easier.


Also the audit of partnership accounts is not statutory but is often provied for in the deed of partnership or by mutual agreement between the partners.

The Act 1890 has a statutory directive on the audit of partnership and this is appicable when there is no partnership deed agreement between the partners.

The right and duties of an auditor are clearly defined and mostly depend on the wishes and instruction of the partners and can be limited as the partners think fit.


The audit of the partnership account provides for dedection and prevention of fraud and errors in addiction to the advantages below:

  1. The audit provides a convenient means of settling accounts between partners themselves.
  2. The auditor is in a position to make valuable suggestion with regard to the system of control and accounting in use or to finance generally.
  3. Where the audited account are accepted as corrected, the audit provides the basis for the settling of the accounts when a partner dies or a new partner is admitted.
  4. The preparation of income tax returns is facilitated.
  5. The sale of the business is rendered easier.
  6. The right of a sleeping partner, if any, or a partner under the limited partnership Act 1970, can be protected where an audit is instructed on his behalf. As the auditor has a duty to each partner separately as well as to the firm copollectively, he must report any infringement of the partnership agreement to all the partners.


Statutory audit are compulsory in the case of limited companies, (the companies Act 1968) CAMD, 1990.

As the companies are owned by the shareholders who have little control and managed by directors elected by them in order to rely on tractions carried out onb behalf of them by these elected directors as represented in the financial statements the Companies and Allied Matters Decree 1990 made the audit of these statements compulsory by professional auditors.


Moreover the various interest groups e.g. Inland Revenue for tax purpose, lenders in the form of bankers and investors, creditors for supplies, employees etc, have credibilitry of the finanical statement when they are prepared by professional auditor. The auditors in this case act as agent of the shareholders and other interested groups.


  1. The examination of the account by the individual shareholders are impossible because they cannot give the necessary time and moreover the article of association stipulate inspection of the books of account by shareholders are not permitted, the auditors report on his audit serves as a panacea to these inabilities.
  2. The directors are controlled and checked through this means.
  3. Fraud and errors by the staff are prevented and detected if it is suspected.
  4. The auditors can offer expert advice in the matters of accountancy and finance generally where it is required.


The audit of these companies are carried out in the accordinace with the respective acts and decrees establishing them. Examples of such statutory companies are National Electric PowerAuthority (NEPA), Nigerian Railway Corporation (NRC).


Accounts of private indivduals, clubs are carried out in accordance with the instruction of those who appointed the auditor but the auditor has to carry it out in the most approprate manner using all skill, care and caution as required by the expertise.


  1. Simplifies preparation of tax income.
  2. Elucidates the transactions as represented in the accounts by their being vouched.
  3. Facilitates comparability of the account from year to year and shows the owners where expenditure is excessive and unjustifable.
  4. On the death pf the person which entails winding up, the accounts and documents are made easily avaliable for compiling estate duties and distribution to beneficiaries.


  1. FINAL OR COMPLETE AUDIT: This is an audit in which the auditor is given, or entitled to, unrestricted scope as to the work which he is to perform, and in which he uses hids own discretion as to the extent of the detailed work. This word “complete” cannot be interpreted to mean that every transactions in a period of accounts would be examined. The audit of a limited audit is a complete audit in that the rights of the auditor cannot be restricted.
  2. INTERIM AUDIT: This is an audit carried out in full or particular period in the accounting year of finanical statements (Balance Sheets and Profit and Loss Account) for the period. Normally this is employed by management whenever they want to know the performance for a particular period sat a quarter. Interim audit generally covers the assesment and testin of internal control, together with detailed checking of transactions.
  3. PARTIAL AUDIT: Partial audit is an audit that naturally follows as being that in which the auditor is instructed to carry out a particular workonly or is restricted in any way as to his powers of enquiry or examination. Example can be cited as situation where the auditor is asked to examine the staff empolyment and emolument only. In the case of partial audit, auditor cannot be held liable for any loss arising, which could have been discovered by reference to the particular books, accounts or documents which the limitations on his instructions prevent from examining.
  4. BALANCE SHEET AUDIT: This is a type of audit that is mainly followed in tht USA. A balance sheet audit can be said to fall essentaily into the partial audit class since it aims at dealing with the balance sheet items only in the main and not with the general transaction of the period since the last balance sheet. The audit consist of the complete verification of every item in the balance sheet; where approprate e.g. in case of fixed assets and liabilities and the like, the  balances are linked up with the corresponding balances at the previous date, by a full consideration of the transactions giving rise to any change in the amounts, such as capital expenditure, sales of assets, issues of capitals and the audit at the end of likes. The underlying idea of the balance sheet audit correspondsclosely with the idea attaching to the ascertainment of profits and on the basis of singlr entry book-keeping, namely that if the balance sheet at two successive dates be properly drawn up, the difference butween the computed totals of the net assets at the two dates respectively, allowing for any increase or decrease of capital or withdrawals of profit must be the profit for the period. He will also examine the profit and loss account to see that income indicated as receivable by reference to the assets (e.g. dividends on investments) and expenditure approprate to liabilities (interests on debentures) have been properly dealt with.
  5. MANAGEMENT AUDIT: This is an audit that evaluates the efficiency of management at all levels throughout an organisation with a view to recommending improvement in rears where effectiveness is not ensured. This quite distinct from mamagement consultancy which involves investigation of an organisation with a view of evaluating it so as to make it more efficient working.
  6. OPERATIONAL AUDIT is used to express the extention of internal auditing to the whole of operations within an organisation, as opposed to the more restricted aspect of internal auditing which are confined to financial and accounting matters.
  7. EFFICIENCY AUDIT is applicable to large organisations involving investigation being carried out independently ta ascertain whether sufficient return is being received on capital invested.
  8. COST AUDIT is the method of verifying the correctness of cost accounts with a view to ensuring that cost accounting plan is adhered to.
  9. VALUE FOR MONEY AUDIT (VFM) is concerned with seeing that planned activities have been acheieved with a view of pursuing economy, efficiency and effectiveness. This type of audit involves all levels of management in an organisation.
  10. CONTINUOUS AUDIT: An audit is said to be continuous when the auditor and his staff attend at regural intervals to carry on the audit during the accounting period.


  1. Much detail checking can be undertaken during the course of the year.
  2. Errors and fraud are detected or discovered shortly after they are made and consequently, rectified immediately and the wrongdoer caught.
  3. The audit of the books at irregular intervals makes work likely to be kept up to date by the staff who knows the auditor can come any time.
  4. The completion or the audit at the end of the year easily faciltated.
  5. This enables the auditor to spread his work throughou the year.


  1. Figures may be altered after being checked either fraudulently or incorrectly.
  2. The auditors clerks may loose thrend of their work by attending several times.
  3. The auditors clerks may be so closely intimated to the staff that of seriousness in the performance of his duty mar prevail.
  4. The frequent attendance may be an inconvenience to the client as sometimes the clients staff may be engaged by the auditors or clerks in finding out a fact that is necessary for the audit.


  1. Alteration of figures may be prevented by specific instructions being given that no alteration should be made after an audit without the auditors notice. Such correction if any should be passed through the journal.
  2. Notebooks should be used by the auditors clerk in taking note of the points he has reached after each audit.
  3. Slightly different ticks may be devised and adopted in checking figures by the auditor which may not be easily be distinguished by the client clerk in cases of alteration.
  4. Totals to the end of the period under review should, where practicable, be recorded in the audit note book which could be verified at the next visit.
  5. Schedules of errors or queries should in particular be written up, dated.
  6. Audit clerks should be made to complete each assignmenet in a particular audit without their being reassigned, this will entaill writing carefully arranged notes on all matters of importance as the work proceeds.
  7. The audit of the impersonal general and private ledger should generally left untill the completion of the audit at the end of the financial period, but it will be usually found more convenient, in case of day book and other totals to verify the posting of such ledgers.

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