Auditing and Accreditation

Accreditation is the independent, third-party evaluation of a conformity assessment body (such as certification body, inspection body or laboratory) against recognised standards, conveying formal demonstration of its impartiality and competence to carry out specific conformity assessment tasks (such as certification, inspection and testing).

Accreditation bodies are established in many economies with the primary purpose of ensuring that conformity assessment bodies are subject to oversight by an authoritative body. Accreditation bodies, that have been peer evaluated as competent, sign regional and international arrangements to demonstrate their competence. These accreditation bodies then assess and accredit conformity assessment bodies to the relevant standards.

An authoritative body that performs accreditation is called an ‘accreditation body’. The International Accreditation Forum (IAF) and International Laboratory Accreditation Cooperation (ILAC) provide international recognitions to accreditation bodies. There are many internationally recognized accreditation bodies approved by the IAF and ILAC.

The Emirates International Accreditation Centre (EIAC) is the largest accreditation body in Middle East region, whereas in South Asia the Pakistan National Accreditation Council (PNAC) and National Accreditation Board for Testing and Calibration Laboratories (NABL), Quality Council of India (QCI) are the largest. In East Asia, the China National Accreditation Board is the largest, while the United Kingdom Accreditation Service (UKAS) is the largest in Europe. The National Association of Testing Authorities (NATA) and the Joint Accreditation System of Australia and New Zealand (JAS-ANZ) being the largest in the Oceania region, with the South African National Accreditation System being the largest in Africa.

For most of the accreditation schemes, international standards issued by the International Organization for Standardization (ISO) are used

Accreditation processes are used in a wide variety of fields:

• Accredited investor
• Accredited in Public Relations
• Accredited registrar
• Construction
• Diplomatic accreditation
• Educational accreditation
  • Higher education accreditation
    • ACGME (USA)
    • List of recognized higher education accreditation organizations
    • List of unrecognized higher education accreditation organizations
      • Accreditation mill
      • List of unaccredited institutions of higher learning
  • Pre-tertiary education accreditation
• Email sender accreditation
• Food safety
  • Global Food Safety Initiative
• Health & Safety Compliance (UK)
• Healthcare
  • American Association for Accreditation of Ambulatory Surgery Facilities
  • Accreditation Commission for Health Care
  • Electronic Healthcare Network Accreditation Commission
  • Emirates International Accreditation Centre (EIAC)
  • International healthcare accreditation
  • Commission on Accreditation of Rehabilitation Facilities
  • Hospital accreditation
  • Joint Commission (USA)
  • United Kingdom Accreditation Forum
• Information assurance
• Personal trainer accreditation
• Professional certification
• Systems engineering
• Translating and interpreting
  • National Accreditation Authority for Translators and Interpreters (Australia)
• Sustainability
  • Sustainable Forest management such as the Forest Stewardship Council (FSC)
  • Sustainable fishing such as the Marine Stewardship Council (MSC)
  • Sustainable aquaculture such as the Aquaculture Stewardship Council (ASC)
  • Sustainable tourism such as the Global Sustainable Tourism Council (GSTC)

Accreditation standards

Many accreditation bodies, such as the UKAS, EIAC, EGAC, PNAC, IAS, NABCB operate according to processes developed by the ISO as specified in ISO/IEC 17011. Accredited entities in specific sectors must provide evidence to the accreditation body that they conform to other standards in the same series:

• ISO/IEC 17020: “General criteria for the operation of various types of bodies performing inspection” (2012)
• ISO/IEC 17021-1: “Conformity assessment. Requirements for bodies providing audit and certification of management systems” (2015)
• ISO/IEC 17024: “Conformity Assessment. General requirements for bodies operating certification of persons” (2012)
• ISO/IEC 17025: “General requirements for the competence of testing and calibration laboratories” (2017)

An audit is an “independent examination of financial information of any entity, whether profit oriented or not, irrespective of its size or legal form when such an examination is conducted with a view to express an opinion thereon.”  Auditing also attempts to ensure that the books of accounts are properly maintained by the concern as required by law. Auditors consider the propositions before them, obtain evidence, and evaluate the propositions in their auditing report.

Audits provide third-party assurance to various stakeholders that the subject matter is free from material misstatement. The term is most frequently applied to audits of the financial information relating to a legal person. Other commonly audited areas include: secretarial and compliance, internal controls, quality management, project management, water management, and energy conservation. As a result of an audit, stakeholders may evaluate and improve the effectiveness of risk management, control, and governance over the subject matter.

Auditing has been a safeguard measure since ancient times, and has since expanded to encompass so many areas in the public and corporate sectors that academics have started identifying an “Audit Society”.

Etymolog

The word “audit” derives from the Latin word audire which means “to hear”.

History

During medieval times, when manual bookkeeping was prevalent, auditors in Britain used to hear the accounts read out for them and checked that the organization’s personnel were not negligent or fraudulent. In 1951, Moyer identified that the most important duty of the auditor was to detect fraud. Chatfield documented that early United States auditing was viewed mainly as verification of bookkeeping detail.

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The Central Auditing Commission of the Communist Party of the Soviet Union (Russian: Центральная ревизионная комиссия КПСС) operated from 1921 to 1990.

Information technology audit

An information technology audit, or information systems audit, is an examination of the management controls within an Information technology (IT) infrastructure. The evaluation of obtained evidence determines if the information systems are safeguarding assets, maintaining data integrity, and operating effectively to achieve the organization’s goals or objectives. These reviews may be performed in conjunction with a financial statement audit, internal audit, or other form of attestation engagement.

Accounting

Financial auditives (including taxation, misselling and other forms of fraud) to misstate financial information, auditing has become a legal requirement for many entities who have the power to exploit financial information for personal gain. Traditionally, audits were mainly associated with gaining information about financial systems and the financial records of a company or a business.

Financial audits are performed to ascertain the validity and reliability of information, as well as to provide an assessment of a system’s internal control. As a result, a third party can express an opinion of the person / organization / system (etc.) in question. The opinion given on financial statements will depend on the audit evidence obtained.

A statutory audit is a legally required review of the accuracy of a company’s or government’s financial statements and records. The purpose of a statutory audit is to determine whether an organization provides a fair and accurate representation of its financial position by examining information such as bank balances, bookkeeping records, and financial transactions.

Due to constraints, an audit seeks to provide only reasonable assurance that the statements are free from material error. Hence, statistical sampling is often adopted in audits. In the case of financial audits, a set of financial statements are said to be true and fair when they are free of material misstatements – a concept influenced by both quantitative (numerical) and qualitative factors. But recently, the argument that auditing should go beyond just true and fair is gaining momentum^].And the US Public Company Accounting Oversight Board has come out with a concept release on the same.

Cost accounting is a process for verifying the cost of manufacturing or producing of any article, on the basis of accounts measuring the use of material, labor or other items of cost. In simple words, the term, cost audit means a systematic and accurate verification of the cost accounts and records, and checking for adherence to the cost accounting objectives. According to the Institute of Cost and Management Accountants, cost audit is “an examination of cost accounting records and verification of facts to ascertain that the cost of the product has been arrived at, in accordance with principles of cost accounting.”

In most nations, an audit must adhere to generally accepted standards established by governing bodies. These standards assure third parties or external users that they can rely upon the auditor’s opinion on the fairness of financial statements or other subjects on which the auditor expresses an opinion. The audit must therefore be precise and accurate, containing no additional misstatements or errors.

Integrated audits

In the US, audits of publicly traded companies are governed by rules laid down by the Public Company Accounting Oversight Board (PCAOB), which was established by Section 404 of the Sarbanes–Oxley Act of 2002. Such an audit is called an integrated audit, where auditors, in addition to an opinion on the financial statements, must also express an opinion on the effectiveness of a company’s internal control over financial reporting, in accordance with PCAOB Auditing Standard No. 5

There are also new types of integrated auditing becoming available that use unified compliance material (see the unified compliance section in Regulatory compliance). Due to the increasing number of regulations and need for operational transparency, organizations are adopting risk-based audits that can cover multiple regulations and standards from a single audit event. This is a very new but necessary approach in some sectors to ensure that all the necessary governance requirements can be met without duplicating effort from both audit and audit hosting resources.