Classification of Audits
    After understanding the meaning, definition, scope and purpose of auditing one needs to understand the classes or types of audit. There can be numerous ways to classify audit. The classification is meant to give understanding of the approaches to look upon the exercise of audit. The classification of Audit does not mean compartmentalisation of audit. The same audit exercise will get different name or classification depending upon the basis used or approach followed. Various classes of audit are given below and the chart is given on the following page:
(A) On the basis of scope :
(i) General
(ii) Specific
(B) On the basis of nature of activity :
(i) Commercial
(ii) Non-commercial
(C) On the basis of form of organisation :
(i) Private
(ii) Government.
(D) On the basis of who conducts the audit :
(i) Independent (External)
(ii) Internal
(E) On the basis of legal necessity :
(i) Continuous audit
(ii) Periodical/completed annual audit
(iii) Balance sheet audit
    Some of the important classifications are discussed below in detail :
 1. Private Audit 

•           When the audit is not a statutory requirement, but is conducted at the desire of owners, such audit is private audit. The audit is conducted primarily for their own interest. At times the private audit may become a requirement under tax laws, if the turnover exceeds a specified limit. Private audit is of the following types :
• Audit of Sole trader's accounts. 
• Audit of accounts of Partnership firms. 
• Audit of accounts of Individuals. 
• Audit of Institutions not covered by Statutory audit.

2 Government Audit 
        Audit of government offices and departments is covered under this heading. A separate department is maintained by Government of India known as Account and Audit department. This department is headed by Comptroller and Auditor General of India. This department works only for government offices and departments. This department cannot undertake audit of non-government concerns. Its working is strictly according to government rules and regulations.
3. Internal audit
      It implies the audit of accounts by the staff of the business. The staff may or may not have professional qualification for audit of accounts. The internal audit staff is permanent in nature and helps the business in early detection of errors and frauds. The objectives and functions of internal audit depend on the nature of operations and business. Sometimes the internal audit may be done by independent persons appointed for the purpose.
4.Statutory or Compulsory Audit
       An audit by qualified persons which is a compulsory requirement under law, is known as statutory audit. The qualified chartered Accountants who are not connected with preparation of accounts or management of the concern, can be appointed as auditors . The various matters relating to conduct of audit ,appointments, duties, rights, liabilities of auditors and presentation of reports are provided in the concerned statute. The following are the statutes covering the audits of various concerns:

• Audit of Companies
• Audit of Accounts of Trust
• Audit of Accounts of Cooperative societies
• Audit of Accounts of other Institutions.

5.Continuous Audit

       As against periodical audit, the continuous audit is conducted throughout the year or at regular short intervals of time. Under this audit, auditor visits his clients regularly and each and every transaction is checked. 

     "A continuous or detailed audit is one where the auditor or his staff is constantly engaged in checking the accounts during the whole period or where the auditor or his staff attends at regular or irregular intervals during the period."

6.Annual or Periodical Audit

      Annual or Periodical audit means when the audit work is conducted after the close of financial year .The auditor visits the client and completes audit in one sitting. After the accounts are finalized the auditor is invited to audit the accounts.

     "A periodical Audit or Balance sheet Audit is one where the auditor attends only at the end of the financial period, and certifies the final statement of accounts after scrutinising the same with the books of account, vouchers and documents"

7. Management Audit

     In management audit an attempt is made to evaluate various management functions and processes. A detailed and critical review of all the objectives, policies, procedures and functions of management is made with a view to bring about an overall improvement in managerial efficiency.

8.Operational Audit

        This audit aims at improving the operation of business. It is an aid to the management in the following ways:

(a)To make recommendations for the improvement of profitability of the organisation.

(b)To help in achieving other objectives of business such as worker's satisfaction, improvement in company's image.

9.Cost Audit

      Cost Audit was first time introduced in 1956 in India when the Central Government added in the Companies Act. The need for such provisions in the Act arose as the maintenance and proper use of scientific cost records is essential for those companies which are engaged in the manufacturing and allied activities. Cost Audit is an effective means of control in the hands of management and it is a check on behalf of the shareholders of the company, consumers and the government.

   In the present day industrial setup every industrialist is conscious about the cost of production. To have a full control on the records of costs and cost variations the services of qualified cost accountants have become necessary. Whereas the cost accountant helps in maintaining proper cost records and suggests the means for reducing the cost of production, there the cost auditor checks the work of cost accountant in order to ensure that the work has been done in accordance with the plan.

10.Tax Audit

      The financial statements are certified by the auditor for truth and fairness of operating results and financial position of a business. These are meant for general purpose being used by the owners, creditors, banks and other interested parties. Sometimes, a specific information may be required by certain people which may not be available in these statements.

     Under Income Tax Act, profits shown by profit and loss account have to be adjusted as per the provisions of the Act. In this way profits for accounting and profits for taxation are not the same. These profits differ due to various reasons. Profits for accounting are ascertained as per accounting policies and standards but profits for tax purpose are computed as per the provisions and rules of Income Tax Act.
 Differences between government and commercial audit PDF