Recent Trends in Auditing: Internal, Management, Cost, Energy, Forensic and Information Systems Audit
This domain tests specialised audit forms: internal audit, management audit, cost audit, energy audit, forensic audit and information systems audit, and how they differ from a statutory financial statement audit.
Core rules
- Internal audit is an independent, objective assurance and consulting activity that improves risk management and control; Section 138 applies to prescribed companies; ICAI Standards on Internal Audit apply.
- Management audit evaluates the efficiency and effectiveness of management’s decisions and performance.
- Cost audit under Section 148 examines cost records and cost statements for compliance and accuracy.
- Energy audit assesses energy use, efficiency and conservation opportunities; it is technical and environmental rather than financial.
- Forensic audit investigates fraud or disputes and produces evidence for legal proceedings; SA 240 guides the auditor’s fraud responsibilities.
- Information systems audit evaluates IT controls, data integrity, access, change management, cybersecurity and computer-assisted audit techniques.
Worked example
Data analytics identifies duplicate vendor payments. This is a red flag, not proof of fraud. The auditor extends testing, examines approval workflows, bank details and related-party links, and considers SA 240 procedures. If fraud is indicated, the matter is reported to the Board or audit committee and, where required, under Section 143(12).
Traps
Equating internal audit with statutory audit; treating a forensic audit as a financial statement audit; and assuming an energy audit is a financial audit.
Exam focus
Distinguishing the objectives, scope and reporting of each specialised audit.