A special audit is an examination with a limited scope compared to a general audit, which identifies a broader scope.
In general, companies conduct special audits to investigate specific areas within the company, such as aspects of information technology systems with an IT audit.
This audit can be carried out by internal or external auditors to ensure the credibility and transparency of financial reports regarding certain aspects.
To better understand the definition of a special audit and other information about this type of audit, see the following article! Read Also: Know the Types of Audits Based on Their Objectives & Scope!
Read Also: Get To Know The Types Of Audits Based On Their Purpose & Scope!
Definition of Special Audit
A special audit is an examination and evaluation that specifically focuses on certain fields of a company's activities or financial reports.
This audit plays an important role in investigating problems or unusual behavior within an organization or company that requires expert opinion or to comply with applicable regulations.
It differs from a general audit, which is used for regular financial statement examinations, because a special audit is only carried out when the examination is indeed necessary.
A general audit is an examination commonly performed in a company on financial reports comprehensively, or what can be called a financial audit.
Meanwhile, a special audit refers to a specific area triggered by special conditions, such as suspicion of fraud, the obligation to comply with regulations, and others.
Objectives of Special Audits
In fact, a special audit can be initiated by government agencies like tax authorities, an entity such as investors and shareholders, as well as internally by the company, such as the board of directors.
These stakeholders can request a special audit if there are suspicions of misappropriation of funds or fraud.
In conducting the examination to identify problems occurring within the company, the following objectives of a special audit will be achieved:
- Investigation of fraud or misuse, auditor will examine the company if there is a suspicion of irregularities, embezzlement, or other types of fraud.
- Ensuring compliance, the auditor will ensure the company's compliance with certain regulations, standards, or contractual obligations.
- Responding to special requests, the auditor will conduct an in-depth examination of a specific area of a company to satisfy external parties, such as investors or shareholders.
- Performing due diligence, the auditor will perform a special audit on certain areas as part of the merger and acquisition process requirements to ensure the financial and operational transparency of the company.
- Reviewing internal control, this audit is carried out at the request of the company that wants to ensure the effectiveness and optimality of internal controls in a specific section.
- Refuting claims, a special audit is conducted to validate or refute claims against the company made by whistleblowers, external, or internal parties.
Types of Special Audits
Fundamentally, the implementation of a special audit can help gain a substantial understanding of fiscal health and make informed decisions about the company's future.
Thus, this audit can increase profit, reduce risk, and improve company performance by enhancing financial management practices.
Among the types of audits that are useful in increasing company compliance, efficiency, and financial management are the following:
1. Fraud Audit
A fraud audit is an examination conducted to detect, prevent, and investigate fraud or deception in a company's financial reports.
This type of special audit plays an important role in maintaining the company's integrity and protecting it from potential financial losses due to fraud.
2. Tax Audit
A Tax Audit is an examination carried out upon a call from the Directorate General of Taxes (DJP) to ensure the compliance of taxpayers or companies with tax obligations and tax regulations.
This allows auditors under the authority of the Directorate General of Taxes to identify any tax violations or fraud found.
3. Compliance Audit
A compliance audit is an examination and evaluation conducted by an auditor to review the company's adherence to regulatory requirements mandated by the industry. In examining its adherence to applicable regulations and standards, a compliance audit can identify possible inconsistencies and provide recommendations for improvement to the company.
4. IT Audit
An IT Audit is an examination conducted to identify whether the company's IT systems, infrastructure, policies, and procedures are operating optimally, securely, efficiently, and in accordance with applicable regulations.
This allows the company to review security risks, system weaknesses, and non-compliance with regulations that could result in cyber-attacks.
Special Audit Execution Process
As an audit with a certain scope in examining specific problems, the audit process will highly depend on the type of audit identified.
The following are the generally executed procedures for a special audit:
1. Planning
Audit planning will involve developing a plan by setting its objectives, determining its scope, and setting the timeframe for completing the audit.
2. Data Collection
In this stage, the auditor will gather evidence in the form of financial data and related documents needed during the audit.
This data includes financial statements, bank statements, receipts, invoices, and other relevant records.
3. Testing
Next, the auditor will perform various tests to ensure the fairness and reliability of the data gathered previously.
These tests include transaction validity tests, examination of financial statement accuracy, and verification of the existence and valuation of assets and liabilities.
4. Investigation
In addition to general examinations, the special audit, which examines certain areas, will be conducted at this stage.
The auditor will carry out additional investigation based on issues relevant to the type of audit. For example, investigating fraud through a fraud audit or regulatory non-compliance through a compliance audit.
The methods used are interviewing employees, reviewing company procedure policies regarding the area, and identifying supporting documentation.
5. Reporting
In this audit stage, the auditor will compile an audit result report with identified findings and recommendations for future improvements.
The audit report will cover an assessment of the company's financial records, a summary of the issues or irregularities found, and improvement recommendations to address them.
Read Also: Complete Guide to Audit procedures, stages, and examples
FAQ About Special Audits
What is a special audit?
A special audit is an examination and evaluation focused specifically on a particular area of a company's activities or financial statements. It is conducted to investigate problems or irregular behavior requiring expert opinion, or to meet regulations.
What is the difference between a special audit and a general audit?
A general audit examines financial statements comprehensively and periodically. A special audit is only carried out when an examination is truly needed, targeting one specific area triggered by special conditions such as suspected fraud or an obligation to comply with regulations.
Who can request a special audit?
Government institutions such as the tax authority, external entities such as investors and shareholders, or internal parties such as the board of directors — usually when suspicions of fund misappropriation or fraud arise.
What is the purpose of a special audit?
Investigating fraud or misuse, ensuring compliance with regulations and contractual obligations, responding to special requests from external parties, supporting due diligence in merger and acquisition processes, reviewing the effectiveness of internal controls, and validating or refuting claims against the company.
What are the types of special audits?
Four types: fraud audit to detect and investigate fraud, tax audits upon summons by the DGT, compliance audits against regulations and industry standards, and IT audits to ensure technology systems and infrastructure run securely and in line with regulations.
How is a special audit carried out?
Five stages: planning that sets the objectives, scope, and deadline; data collection in the form of financial statements, bank statements, receipts, and invoices; testing transaction validity and report accuracy; additional investigation according to the audit type through interviews and policy reviews; then reporting findings with improvement recommendations.
Conclusion
Such is the explanation of the importance of a special audit in maintaining company transparency and accountability, so that the institution can make better decisions after the audit is complete.
As explained, the results of a special audit will cover the scope, findings, and recommendations that can support the company's sustainability.
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