Internal Audit:
An internal finance audit is an independent assessment of a company’s financial processes, controls, and systems conducted by its internal audit department or an external audit firm. The purpose of an internal finance audit is to evaluate the effectiveness, efficiency, and reliability of financial operations within the organization. It helps identify areas of risk, detect fraud or irregularities, and ensure compliance with applicable laws and regulations.
During an internal finance audit, auditors review financial records, transactions, and accounting practices. They assess the adequacy of internal controls, including segregation of duties, authorization procedures, and safeguards against unauthorized access or manipulation of financial data. The audit also examines financial reporting accuracy, adherence to accounting principles, and the completeness of financial disclosures.
Stock Audit:
A stock audit, also known as a physical inventory audit, is an examination and verification of a company’s physical inventory or stock holdings. It involves counting, valuing, and reconciling the physical stock with the corresponding accounting records. The objective of a stock audit is to ensure accuracy in inventory management, prevent theft or misappropriation of stock, and assess the overall efficiency of inventory control systems.
During a stock audit, auditors physically count the stock items, inspect their condition, and verify their accuracy against the recorded inventory. They may also evaluate stock valuation methods, storage practices, and documentation procedures. The audit helps identify discrepancies between the physical stock and the recorded stock, such as excesses, shortages, damaged goods, or obsolete inventory.
Credit Audit:
A credit audit, also known as a loan portfolio audit or credit risk audit, is an examination of a company’s credit portfolio and lending practices. It focuses on assessing the quality, performance, and risk associated with the company’s loan portfolio. The objective of a credit audit is to evaluate the creditworthiness of borrowers, analyze the effectiveness of credit risk management, and identify potential risks or vulnerabilities in the lending process.
During a credit audit, auditors review the company’s loan documentation, credit approval processes, risk assessment methodologies, and loan monitoring procedures. They assess the adequacy of credit underwriting standards, collateral valuation practices, loan classification and provisioning, and adherence to regulatory guidelines. The audit also examines the performance of the loan portfolio, including delinquencies, defaults, and recoveries.