Audit and Risk Management
Auditing is defined as the on-site verification activity, such as inspection or examination, of a process or quality system, to ensure compliance to requirements.
An audit can apply to an entire organization or might be specific to a function, process, or production step.
Some audits have special administrative purposes, such as auditing documents, risk, or performance, or following up on completed corrective action.
Process audit: This type of audit verifies that processes are working within established limits. It evaluates an operation or method against predetermined instructions or standards to measure conformance to these standards and the effectiveness of the instructions.
Check conformance to defined requirements such as time, accuracy, temperature, pressure, composition, responsiveness, amperage, and component mixture.
Examine the resources (equipment, materials, people) applied to transform the inputs into outputs, the environment, the methods (procedures, instructions) followed, and the measures collected to determine process performance.
Audit and Risk Management Solutions
Check the adequacy and effectiveness of the process controls established by procedures, work instructions, flowcharts, and training and process specifications.
- Product audit: This type of audit is an examination of a particular product or service, such as hardware, processed material, or software, to evaluate whether it conforms to requirements (i.e., specifications, performance standards, and customer requirements).
- System audit :An audit conducted on a management system. It can be described as a documented activity performed to verify, by examination and evaluation of objective evidence, that applicable elements of the system are appropriate and effective and have been developed, documented, and implemented in accordance and in conjunction with specified requirements.
Risk management must control identified risks to help the company achieve its performance and profitability targets, prevent loss of resources, ensure reliable financial reporting, and ensure compliance with laws and regulations, avoiding damage to its reputation and other consequences.
Audit risk is the risk that financial statements are materially incorrect, even though the audit opinion states that the financial reports are free of any material misstatements. The purpose of an audit is to reduce the audit risk to an appropriately low level through adequate testing and sufficient evidence. Because creditors, investors, and other stakeholders rely on the financial statements, audit risk may carry legal liability for a CPA firm performing audit work.