Question

Write a brief note on COSO-BASED AUDITING and PERFORMANCE-BASED AUDITING and how these two are different from RISK-BASED AUDITING?

Answer 1

COSO BASED AUDITING:

Committee of Sponsoring Organizations of the Treadway Commission. It is a joint initiative to combat corporate fraud. COSO Framework is designed to be used by organisation to assess the effectiveness of the system of internal control to achieve objectives as determined by management.

The framework list three categories of objectives:

Operation objective: Relating to effectiveness and efficiency of the entity operation.

Reporting objective: Relating to internal and external financial and non financial reporting to stakeholders.

Complaince objective: Related to entity complaince with applicable laws and regulation.

PERFORMANCE BASED AUDITING

A performance audit. is an independent assessment of an entity's operations to determine if specific programs or functions are working as intended to achieve stated goals. Performance audits are typically associated with government agencies at all levels as most government bodies receive federal fund. Typically performance audit evaluate the isssues of economy, efficiency and effectiveness.

Difference between COSO BASED AUDITING, PERFORMANCE BASED AUDITING from RISK BASED AUDITING:

Risk based audit is an audit approach that analyzes audit risks, sets materialty thresholds based on audit risk analysis and develops audit programmes that allocate a larger portion of audit resources to high - risk areas. It is based on managing and reporting risk in an organisation.

Whereas the other two audits emphasizes on economy, efficiency and effectiveness of operations.