The main difference between Audit and Evaluation is that an Audit is an official inspection of an organization’s accounts. It is done to determine the accuracy of the financial statements provided by the organization; on the other hand, Evaluation is a systematic process to find out a subject’s merit, worth, and significance. It is done by using criteria governed by a set of standards.
|Meaning||An audit is the inspection of the financial report of an organization.||Evaluation is a procedure that critically examines a program to determine how effective it is.|
|Purpose||The motive of an audit is to provide an objective and independent examination of financial reports.||The purpose of an evaluation is to make judgments about a program to improve its effectiveness.|
|Type||There are two major types of audits that are mostly conducted internal audits and external audits.||There are two types of Evaluation formative and summative.|
What is an Audit?
An Audit is the inspection of different books of accounts by an auditor that can be internal and external, followed by physical checking of inventory to ensure that all departments follow a documented system of recording transactions. It is done to determine the accuracy of financial statements provided by the organization.
Audits can be done internally by an employee by the heads of a particular department, an external firm, or an independent auditor. The purpose is to check and verify the accounts and financial statements by an independent authority to ensure no misrepresentation or fraud in the books of accounts.
All publicly held companies have to get their accounts audited by an independent auditor or firm before declaring their results for any quarter.
There are four main steps in the auditing process.
The first step is to define the role of the auditor and the terms of engagement which is commonly in the form of a letter that the client rightly signs.
Secondly, the Audit is planned, which includes details of deadlines and which departments the auditor will cover. If it is a single department or the whole organization that the auditor is going to cover. It depends on the nature of the Audit that the Audit will last a day or week.
In the next step, the information gathered from the Audit is compiled by the auditor, and all the data and financial statements are put out in a report or compiled systematically.
Lastly, the most crucial element of an audit is done that is reporting the final results.
There are two main types of audits
- Internal Audit
- External Audit
Internal audits are done to check its internal controls, including its corporate governance and accounting processes. These audits help to maintain precise and timely financial reporting and data collection.
External audits are also done to check a company’s financial statements and account records, but a qualified independent third party conducts it. A typical example of an external audit is an audit by IRS.
Evaluation is a systematic way to determine a subject’s merit, worth, and significance by using a specific set of standards. The primary purpose of an evaluation is to gain insight into prior or existing initiatives. It is to determine the quality of a program by formulating a judgment.
The first step for Evaluation is to know what is to be evaluated, whether it is a program or policy, etcetera. According to that program or policy, a model or set of standards is developed, including goals, activities, outputs, and outcome objectives.
Secondly, to ensure the Evaluation is practical, develop a data collection plan that includes what to measure when to collect data, how to collect data, and from whom to collect data and take actions accordingly. After collecting all necessary data, a proper step-by-step evaluating program is developed, and that process does the Evaluation.
There are two main types of evaluations
This Evaluation is done during the development or while starting a new program to know how well is the program being delivered and what we can do to make it better to make early improvements.
Summative Evaluation is done after the completion of the program to know how effective it was, and it helps decide whether to continue the program, end it or expand the program.
Key differences between Audit and Evaluation
- The Audit is done to check the financial statements and books of accounts and ensure there is no misrepresentation or fraud. In contrast, Evaluation is done to make sure a program or policy is effective or not.
- The audits are usually done in whole companies or a specific department in a company, while Evaluation is done of a program, policy, or a working system.
- After the Audit is ended, a detailed report is made of financial statements and accounts. On the other hand, after the Evaluation is completed, information is made on the program’s effectiveness, and recommendations are made to make it more effective.