Audit is an instrument, a tool of financial control, which is employed by the public or private sector or an individual to safeguard itself against fraud, extravagance and more importantly to bring credibility to the audited.

According to International Organization of Supreme Audit Institutions audit is defined as “Evaluation or examination of systems, operations and activities of a specific entity, to ascertain they are executed or they function within the framework of certain budget, objectives, rules and requirements.” This is a modern definition of audit in Public sector and does not constrict itself with only cash audit, which was the case originally.

For sound and effective functioning of government and to ascertain that the benefit of public funds being used, reach the lowest strata of society and to every individual, audit is an indispensable tool.

It helps secure accountability of the executive to the Parliament and towards the public in general. The legislature can exercise control over the executives and verify that the public resources have been utilized responsibly, for the purpose intended and funds raised through various sources like taxes reach government fully.

There are a few International bodies which recommends agreed upon auditing practices, reports and requirements. They are:

1. INTOSAI: International Organization of Supreme Audit Institutions
2. IFAC: International Federation of Accountants
3. IGAE: Intervencion General de la Administracion del Estado

In accordance with the target objective several kinds of audit can be defined in Public Sector.

1. Financial Audit: Intended to verify financial statements, accounts and balances as per generally accepted accounting principles. Also, to verify money expended has been applied to the same purpose and premise for which it was obtained and within the boundaries of acceptable vagaries.

2. Audit of Legality Concordance: Intended to verify all transactions, processes are in full accordance with the law of the land and do not in any case harm or influence an organization or an individual for its own means.

3. Audit of efficacy or of programs: Intends to verify the result obtained from a plan for which money was employed is in conformance with the objective for which program was made.

4. Audit of Economy and efficiency: Intends to verify the way resources have been managed. Whether resources have been acquired at minimum cost and employed for maximum benefit.

5. Audit of Systems and Procedures: It is important for every organization which follows rules and laid down principles to verify its system and processes for improvement and quality conformance.

Financial and Audit of Legality concordance were originally grouped together to form Audit of Regularity and rest other audits were termed as Operational Audit.

After audit is complete it is necessary to file a report which has adequate representation of facts and figures, adequate content, adequate preparation, adequate opinion for the target audience to understand it better and enough publicity for the report.

Audit must be treated as an instrument for exercising control over processes, systems, finances and individuals to make governments and governing bodies more responsible towards the public and its resources, but it cannot be considered as an end unto itself.