audit

(noun)

An independent review and examination of records and activities to assess the adequacy of system controls, to ensure compliance with established policies and operational procedures, and to recommend necessary changes in controls, policies, or procedures.

Related Terms

Examples of audit in the following topics:

  • Types of environmental audits

    • Acquisition audit.
    • Compliance audit.
    • Due diligence audit.
    • Waste audit.
    • Water audit.

  • Getting started

    • Communicate the goals of the audit to everyone beforehand.
    • Identify the parameters of the audit.
    • How will the audit's findings be recorded?
    • Determine these issues before an audit begins.
    • Audits should be conducted on a regular basis.

  • Environmental audits

    • Just as the process of mapping out a work system isn't called process-mapping by waste-minimization practitioners, when setting out to gather and/or check sustainability facts and figures, many practitioners don't refer to what they're doing as an audit.
    • The word ‘audit', however, is appropriate even though most accounting systems fall far short of what an understanding of sustainability requires (e.g. clean air has no financial value, but try living without it).
    • Professional auditors go a step further, using the term environmental audit to describe the gathering, checking and analysis of material use – as well as the measuring of waste and emission levels.
    • Make no mistake, despite the fact that the word ‘environment' makes up the name, environmental audits are similar to financial audits in that they are very effective in reducing waste.
    • Comparing audit results to industry standards (such as ISO 14001 standards and guidelines), and

  • Environmental audits don't hurt

    • According to companies that have undergone an environmental audit, the process is relatively painless.
    • For example, the Glasgow Housing Association in Scotland (the largest social landlord in the UK) had a first-time environmental audit performed at its headquarters by the British Safety Council, which identified over $51,000 in savings.
    • (www.britsafe.org/download/audits-advisories/5-star-environmental-brochure.pdf)
    • Seen this way, an environmental audit can lead to cost savings that morethan pay for the price of the audit.
    • Genzyme Diagnostics, for example, a biotechnology company in the UK, had an environmental audit performed thatuncovered over $80,000 in potential annual savings resulting from waste elimination suggestions, reuse and recycling tips, and lighting and water-use reduction measures.

  • Quality Inspections and Standards

    • Companies ensure the quality of products and services by adhering to ISO standards and performing quality audits to ensure compliance.
    • Quality audits and adherence to ISO standards are not just for private corporations; the US Food and Drug Administration requires that medical devices undergo quality auditing, and several countries require quality audits of their educational systems.
    • A quality audit is the process of systematic examination of a quality system carried out by an internal or external quality auditor or audit team.
    • Quality audits can be an integral part of compliance or regulatory requirements.
    • Audits can also be used for safety purposes.

  • Ethical Issues at an Organizational Level

    • The Enron scandal, revealed in October 2001, eventually led to the bankruptcy of the Enron Corporation, an American energy company based in Houston, Texas, and the de facto dissolution of Arthur Andersen, which was one of the five largest audit and accountancy partnerships in the world.
    • In addition to being the largest bankruptcy reorganization in American history at that time, Enron was attributed as the biggest audit failure.
    • Fairness in trading practices, trading conditions, financial contracting, sales practices, consultancy services, tax payments, internal audits, external audits, and executive compensation also fall under the umbrella of finance and accounting.

  • Quality costs

    • In addition, quality audits, sampling, and statistical process control also fall under the umbrella of appraisal costs.
    • Quality audits and sampling are also important appraisal costs.
    • Quality audits are checks of quality procedures to ensure that employees and suppliers are following proper quality practices.

  • Separating the wheat from the chaff

    • If a company can't back up its claims with valid certifications, official audit reports or similar documentation it's probably not telling the truth.

  • Government Regulation

    • the US Environmental Protection Agency's Audit Policy is an example of government regulation.

  • Outsourcing