Auditing typically refers to budget audits or an objective examination and evaluation of a company’s financial statements – usually performed by an external third party. 

These are the three types of audits:

Internal Audit

Performed by the employees of the company, these audits are not shared outside the organization.

These are usually prepared for management and internal stakeholders.

Management teams often utilize internal audits to spot flaws or inefficiencies within the corporation.

External Audit

Performed by third parties and external organizations. They provide unbiased views that internal auditors might not be able to give.

External financial audits work out any material misstatements or errors during a company’s financial statements. External auditors can provide unbiased and independent expertise that you may not get in an internal audit.

Government Audit

These are to ensure that the financial statements are maintained accurately and correctly represent the quantity of taxable income of a corporation.

Government auditing is also known as Yellow Book.

This is usually an independent and systematic examination of financial statements.