(i) Statutory audit
This is an audit carried out as per the requirements of the Company‘s Act for limited companies be they private or public. The Company‘s Act, Cap 486 requires that all limited companies submit their returns at the end of the financial period to the registrar of companies and that these returns should include the audit report. In these audits, the auditors appointment is as per Section 159 (1) – (6) of the
Company‘s Act. His rights and duties are defined in Section 162 (1) – (12). This Act opens up the auditors scope, rights and duties and extensions of his liabilities which cannot be limited by any powers be they the shareholders or Board of Directors.
During such audits the auditor is free to obtain all the information and explanations he considers necessary for the purpose of forming an opinion.
(ii) Private audit also known as non-statutory audit.
These are audits conducted for private institutions, which are not required by any statutes to have their financial statements audited. The audits are not mandatory but are carried out for the convenience of such organizations.
By virtue of its nature the auditor‘s scope, rights and duties are defined by an agreement between the auditors and owners or agents of the company. The auditor‘s obligations are contractual since they are based on an agreement between the auditor and his clients.
This agreement is crucial as it forms the basis for defining the auditor‘s duties, rights and obligations. Thus the auditor should ensure that the agreement between him and the client clearly defines his scope.
In such audits, the auditors rights and scope may be limited and due to such limitations the auditors opinion will usually contain a disclaimer clause.
(iii) Balance Sheet audit
These are audits in which the auditor starts his audit work from the balance sheet and traces entries to their original posting in a bid to prove their authencity. This audit concentrates on balance sheet entries and falls under partial audits as the auditor will not check all entries but will rely on evidence obtained on balance sheet entries to form conclusions as to whether all other entries are authentic. For this reason, this audit is only appropriate for organizations which have a strong internal control system or when conducting a special audit assignment where the client requires the auditor to only report on the balance sheet items.
(iv) Management audit
These involve the investigation of the company‘s entire management to ascertain their decision making process, especially of the top management and their attitude towards the operation of the internal control system, personal relationships with employees and their ability to manage an efficient and viable company.
It is ideal: –
a. Where there are dynamic operations in an organization.
b. For company‘s using high technology