This article is to provide a quick guide to understand the various types of audits involved in the development of a particular project. All these audits are sub-types of Environmental Auditing that together provide a systematic data necessary for the proper planning, management, mitigation of risk elements and environmental clearance of the project in hand.

Consumption Audit

A consumption audit is also known as an Energy Audit. It is an inspection, survey, and analysis of energy flows, for energy conservation in a building, process or system to reduce the amount of energy input into the system without negatively affecting the output(s). In commercial and industrial real estate, an energy audit is the first step in identifying opportunities to reduce energy expense and carbon footprints.
When the object of study is an occupied building then reducing energy consumption while maintaining or improving human comfort, health and safety are of primary concern. Beyond simply identifying the sources of energy use, an energy audit seeks to prioritise the energy uses according to the greatest to least cost-effective opportunities for energy savings.

Level/Types of consumption audit

Common types/levels of energy audits are distinguished below. There are four levels of analysis that can be outlined.

  • Level 0 – Benchmarking:

This first analysis consists in a preliminary Whole Building Energy Use (WBEU) analysis based on the analysis of the historic utility use and costs and the comparison of the performances of the buildings to those of similar buildings. This benchmarking of the studied installation allows determining if further analysis is required;

  • Level I – Walk-through audit:

A preliminary analysis made to assess building energy efficiency to identify not only simple and low-cost improvements but also a list of energy conservation measures (ECMs, or energy conservation opportunities, ECOs) to orient the future detailed audit.

This inspection is based on visual verifications, the study of installed equipment and operating data and detailed analysis of recorded energy consumption collected during the benchmarking phase;

  • Level II – Detailed/General energy audit:

Based on the results of the pre-audit, this type of energy audit consists in energy use survey in order to provide a comprehensive analysis of the studied installation, a more detailed analysis of the facility, a breakdown of the energy use and a first quantitative evaluation of the ECOs/ECMs selected to correct the defects or improve the existing installation.

This level of analysis can involve advanced on-site measurements and sophisticated computer-based simulation tools to evaluate precisely the selected energy retrofits;

  • Level III – Investment-Grade audit:

Detailed Analysis of Capital-Intensive Modifications focusing on potential costly ECOs requiring a rigorous engineering study.

Hazardous Waste Audit

Hazardous waste generators have a duty of care in ensuring that their wastes are disposed of in an environmentally acceptable manner. Increasingly, generators are being made liable for environmental damage at the site of a waste disposal contractor if their wastes have been accepted by that facility.
A Hazardous waste audit is a procedure that permits generators to examine the performance of waste vendors and to assess their potential liability as a result of using the site. Post-audit decisions involve estimating the degree of risk and selecting appropriate waste contractors.

Waste Disposal Audit

One of the most overlooked expenses on an income statement is waste disposal and recycling. A Waste Disposal Audit helps a company to save 25% to 60% on its waste Disposal expense!

Benefits of waste disposal audit

Conducting a proper and systematic waste disposal audit has the following benefits for a company or organisation.

  • Improved efficiencies
  • Better practices
  • Billing overcharges
  • Improper tax applications
  • Better pricing
A successful waste disposal audit is always done with a collaboration with experts in the waste and recycling industry can bring these expenses under control.

Cost Audit

Cost Audit represents the verification of cost accounts and checks on the adherence to cost accounting plan. Cost Audits ascertain the accuracy of cost accounting records to ensure that they are in conformity with Cost Accounting principles, plans, procedures, and objective.
The basic model of Cost auditing comprises the following:
  1. Verification of the cost accounting records such as the accuracy of the cost accounts, cost reports, cost statements, cost data and costing technique and
  2. Examination of these records to ensure that they adhere to the cost accounting principles, plans, procedures, and objective.

Objectives of Cost Auditing

  • Prospective Objective

Under which cost audit aims to identify the undue wastage or losses and ensure that costing system determines the correct and realistic cost of production.

  • Constructive Objectives:

Cost audit provides useful information to the management regarding regulating production, economical method of operation, reducing the cost of operation and reformulating Cost accounting plans.

Steps of Cost Auditing
Cost audit comprises following three steps;
  • Review

The auditor-review committee reviews and studies the financial framework of the project in hand. Thi includes assessing data from the entire cost department including wages, raw material prices, clearance prices, expense on machinery and insurance, etc

  • Verification

This step involves thorough verification and cross-checking of the planned financial framework and the actual cost (Real-time) expenditures of the project in hand.

  • Reporting
This step involves the final interpretation, drafting, and submission of the auditing report to the financial audit committee for further analysis and clearance.
Types of Cost Auditing
  • Cost Audit on behalf of the management:
  • Cost audit on behalf of a customer
  • Cost Audit on behalf of Government
  • Cost Audit by the trade association
  • Statutory Cost Audit

Voluntary Audit

A voluntary audit provides independent assurance on the financial statements, which certain stakeholders require. The audit can be particularly important for member organisations or for entities trying to secure bank funding.
In simple words, a voluntary audit is not enforced by an organisation by a government, law or protocols. It is entirely an independent audit that can be done by hiring officials from various private auditing organisations.
An organisation may or may not choose to perform a voluntary audit according to its financial and management requirements. In short, a voluntary audit is an independent marketing and management tool for proper management planning to grow a business.