Hey there! As an auditor, I want to talk to you today about something that’s very important to me, and believe me, it’s more exciting than it sounds: audits. Now, “What is an audit, and what are the types of audits?” is undoubtedly on your mind. Well, I’m going to tell you what it is.
Audits are like your company’s guards working behind the scenes. Their job is to ensure everything is going smoothly, whether they’re making sure you’re following the rules or making sure your finances are accurate. Audits are required to maintain businesses operating legally, safely and efficiently. Well, let’s get going! The many types of audits keep companies like yours on the right track.
According to Wikipedia “An audit is an independent examination of information of any entity, whether profit oriented or not, irrespective of its size or legal form when such an examination is conducted with a view to express an opinion thereon.”
In simple words, auditing is all about providing a fair evaluation of compliance (whether law, standard or internal procedures).
Just like doctors check us to make sure we’re healthy, auditing helps companies to make sure they’re following the requirements and doing things the right way.
The audit process is a bit like a treasure hunt. During an audit, auditors search for evidence against a set of requirements. Set of requirements could be anything such as a local regulation (e.g., Workplace Health and Safety Act) or an internal procedural compliance (e.g., Invoicing procedure).
To achieve this, they may need to monitor actions, communicate with workers, and review important papers. Ensuring that everything is where it belongs is the main goal.
Auditors use such requirements to compare and contrast various processes, systems or documents and come to a conclusion and present their evaluation – referred as Audit Findings.
Auditing and inspection are two critical processes used to ensure compliance and quality in various industries, but they serve distinct purposes and are carried out differently.
Auditing is a systematic, independent evaluation of processes, systems, or organizations to determine whether they comply with specific standards, regulations, or internal policies. The goal is to assess overall effectiveness and identify areas for improvement.
Inspection, on the other hand, is a detailed examination of specific products, equipment, or operational practices to verify that they meet defined criteria or specifications. It focuses on detecting defects or non-conformities.
Auditing is like investigation. Instead of solving crime, auditing helps identify business gaps. Auditing is used to identify the compliance, find places where things could be better and make suggestions.
Auditors are taught to find problems and suggest ways to fix them, which makes them very useful to any business.
We now understand what an audit is, let us look at the different common types of audits. There is a specific goal and reason for each type.
Audits against ISO standards focus on conformance with the standard requirements such as ISO 9001 for Quality Management Systems or ISO 27001 for Information Security. These audits verify that organizations comply with international standards, increasing their reputation and efficiency.
These are conducted by the organization itself. Basically, it’s a self-check to make sure they’re following ISO rules.
As an example, a manufacturing company might do an internal audit to make sure that ISO 9001 is being followed by its quality management system.
While there are several reasons for conducting out an internal audit, some typical ones are as follows:
If you’re looking to choose the right ISO consultant for certification, look for someone who can make the process of internal auditing easier. The best consultants help you track efficiency, ensure compliance with ISO standards, and identify areas for improvement.
They also ensure your internal audits accurately check financial records, risk management, and operational procedures. This will help your team not only meet requirements but also improve overall performance.
Supplier audits are all about making sure your suppliers are doing things right.
Think about it this way: Let’s say I own a company in Sydney that makes cars. I get things from a number of different sources, such as engines, tires, and electronics. To keep the quality of my car good, I need to be sure that the parts they send me meet my standards.
With that in mind, I send a team to pay a visit to a key supplier—perhaps a tire factory in Brisbane.
We walk through their factory, check their processes, and ask questions. Are they using the right materials? Are they following safety and quality guidelines? In this way, I can be sure that the tires I buy are safe, long-lasting and fit my cars properly.
By doing this, I keep my customers satisfied with high-quality automobiles, safeguard my company against defective components and save money on returns and repairs. It also helps me trust my supplier more because we are both careful to keep standards high. The two businesses benefit from working together after this kind of supplier audit.
These are conducted by independent bodies for certification purposes. For instance, a tech company in Melbourne might undergo an external audit to get certified for ISO 27001, which focuses on information security. These audits are something I’ve personally conducted many times.
This kind of external audit doesn’t just give companies a certification to hang on the wall. It gives them confidence that their systems are secure and that they’re following best practices. In the tech industry, this kind of assurance can be a game changer for both reputation and customer trust.
To select the best ISO certification body, start by choosing one with a strong reputation for thorough external audits. Look for a body that guarantees that your business satisfies ISO standards in reality, not just on paper.
The right certification body will give you the confidence and credibility to demonstrate your commitment to security and best practices, boosting trust with customers and stakeholders. Once you’ve been certified, you should always verify the authenticity of your ISO certificate online at the website of the certification body to make sure it’s genuine.
An operational audit is a lot like an internal audit, but the main goal of an operational audit is to make a company’s systems better.
I’ve often seen businesses, like a manufacturing company in Melbourne in 2023, conduct these audits internally, although some prefer to bring in external auditors for a fresh perspective.
The purpose of an operational audit is to evaluate how well a company’s policies, goals, and processes align with its overall performance.
The auditor examines everything from planning to execution to identify inefficiencies and suggest improvements that can make the organization run more smoothly and effectively.
A financial audit is like using a magnifying glass over a business’s financial records to ensure that all the information is correct and complies with accounting regulations. The value of these audits in a variety of businesses is something I have personally seen.
For example, a retail chain in Adelaide may undergo an external financial audit to verify its financial statements, making sure everything checks out correctly.
Auditors carefully look over all of a business’s activities, processes and checks and balances to make sure that the company’s financial reports are correct and accurate. After that, lenders, creditors, and investors can see the audit report, which is released by the auditor (usually a third party) and gives them confidence in the company’s financial security.
A compliance audit checks to see if a company is following all the laws, rules, and standard operating procedures that apply to it. As an auditor, I’ve seen it play a significant part in places like the pharmaceutical industry.
For example, a pharmaceutical company in Melbourne underwent a compliance audit to ensure it was meeting FDA regulations, which helped them avoid costly legal issues. These checks also cover areas such as workers’ compensation and IRS regulations.
Apart from ensuring legal compliance and operational integrity, they comfort businesses that they are going in the right direction.
When I conduct an Information Systems (IS) audit, I look closely at how businesses manage their IT risks. It helps me check if their systems are safe, secure, and running smoothly. As an example, a Melbourne, Australia IT company might conduct an IS audit to make sure hackers can’t get to their data and to find ways to make things better.
I often see tech companies relying on these audits to protect their software and customer data. It’s also common in banking, where protecting sensitive information is key. In 2022, a software firm in Sydney used an IS audit to catch issues with their data processing system. This allowed them to fix problems before they caused bigger damage.
Stakeholders are also reassured by an IS audit. It proves to them that the company’s IT infrastructure is safe and helps it achieve its objectives.
Moreover, these audits aren’t limited to IT firms. Even a non-tech company, like a Brisbane retailer, may benefit from doing simple cybersecurity checks to protect their customers’ personal information.
In simple terms, these audits make sure the system does what it’s supposed to and keeps the bad guys out!
A forensic audit looks closely at a business’s financial records to find evidence of fraud, theft or other illegal activity. For example, if a Sydney business sees that money is going missing, a forensic audit might show that there were possibly fraudulent transactions or bills.
The main goal of this type of audit is to gather strong proof that can be used in legal or to settle disagreements between parties. Anyone who is worried about financial fraud usually uses it to figure out what went wrong and make sure that any wrongdoing is dealt with properly.
An IRS tax audit verifies whether a company has properly submitted its tax filings. For example, a small retail company in Melbourne was audited in 2022 to make sure it hadn’t underpaid or overpaid its taxes. If tax information is sent to the IRS, they check it for mistakes and differences.
There is no set time for these types of audits. An IRS agent will sometimes meet with the business in person and sometimes do them through the mail. A company being audited doesn’t always mean it did something wrong, but it does make sure taxes are paid properly.
The IRS compares business tax returns with those of other companies using a system. For example, if the system notices a cost that seems too high, the business could be audited. If a business works with another business that has tax problems, it may also be audited.
There are three main outcomes of an IRS audit
In short, an IRS audit ensures businesses are paying the right amount of tax—no more, no less.
A payroll audit determines whether a company is appropriately managing its payroll processes. For example, a local café in Brisbane conducted a payroll review in 2023 to verify compliance with wage regulations, ensure accurate tax withholdings, and maintain current employee records.
During a payroll audit, you review things like pay rates, wages, tax withholdings and employee details to spot any mistakes. It’s a good idea for businesses to do these audits every year. This helps catch errors early and ensures compliance with laws, which can prevent bigger problems later.
Companies sometimes do their own payroll audits, but other times they might hire a third-party auditor to get a different point of view. Regular audits are a good way to keep things running smoothly and avoid problems like fraud and fines.
Want to learn about ISO standards? Don’t miss our blog: What is an ISO Standard? An Easy Guide with Examples and Benefits to see how they can benefit your business!
Audits assist companies in identifying and correcting errors, complying with the law, and avoiding issues like fraud. They give owners and stakeholders confidence that everything is being done properly.
Depending on the needs of the business, audits can be done by employees or professionals from outside the business.
Audit types and purposes dictate how often audits should be conducted. Depending on the certification, external audits may happen every few years and internal audits may happen once a year. Having a consistent schedule is crucial for maintaining compliance and making continuous improvements.
Regular audits help in maintaining compliance, improving processes, and enhancing organizational credibility. They provide valuable insights into areas that need improvement and help in building trust with stakeholders.
If issues are found during an audit, the company may need to correct mistakes, change processes, or pay fines. For example, if a Sydney based company fails a compliance audit, it might have to update its practices to meet local laws.
Yes, audits are important for businesses of all sizes. Even a small coffee shop in Melbourne may need to do regular financial or payroll audits to stay organized and avoid errors.
An internal audit is done by employees of the company to check how well they are doing. An external audit is performed by an outside professional who provides an independent review.
Yes! Audits can help businesses find ways to improve. A performance audit, for example, shows a Sydney company how to use its resources more efficiently to save money.
As you can see why audits are so important and how they keep up with regulations, making processes better and raising the calibre of a company. They help keep things on track and find problems early. When you think about audits, keep in mind that their goal is not only to find problems but also to make things better.
If you’re looking for ISO experts to enhance your audit processes, I recommend CertBetter. You can use our global directory of ISO consultants, auditors and trainers to get the help you need to stay compliant and make your processes work best for growth. Let’s make audits work for you!
🎯 ISO Certification Auditor – QHSE Professional
I founded CertBetter to bring ISO experts together in one place, so you can find and connect ‘Better‘.
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