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Auditing: The audit profession and International Standards on Auditing · Types of Audits and Auditors

Distinguishes financial, compliance, operational and forensic audits, internal from external auditors, and audits from reviews and other engagements.

Auditing · 25 questions

Try 3 questions

1. What does an external audit of a company's financial statements actually produce?

  1. A certificate that the business is financially healthy
  2. A guarantee that no fraud has occurred
  3. An opinion on whether they are fairly presented
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Answer: An opinion on whether they are fairly presented

The auditor's product is an opinion on fair presentation under the reporting framework; it says nothing about the company's solvency and cannot rule out all fraud.

2. A lender hires an auditor to check whether a borrower kept its debt ratio within the limit set in the loan contract. What type of audit is this?

  1. An operational audit
  2. A compliance audit
  3. A forensic audit
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Answer: A compliance audit

A compliance audit tests whether an entity follows specific rules set by an outside party, here the covenants in a loan contract.

3. A retail chain asks for an evaluation of whether its delivery routes waste fuel and staff time. Which type of audit fits?

  1. A financial statement audit
  2. An operational audit
  3. A compliance audit
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Answer: An operational audit

Operational audits assess the efficiency and effectiveness of activities, not the accuracy of accounts or adherence to rules.

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