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First-party Audit |
Second-party Audit |
Third-party Audit |
|---|---|---|
| Internal audit | Vendor audit | Regulatory audit |
| Supplier audit | Adherence to a standard audit |
An audit is the verification, inspection, or examination of a process, product, or system to guarantee compliance with regulatory or organizational requirements. The scope of an audit can apply to an entire organization or be limited to a specific function, step, or process.
An internal audit or a first-party audit is performed to measure an organization’s strengths and weaknesses and compare them to internal and/or external standards and procedures. The organization may voluntarily or mandatorily adopt these standards and procedures. These audits are conducted by auditors who are employed by the organization but have no vested interest in the audit findings.
A vendor audit or second-party audit is performed on a supplier by a customer or contracted company. The goods or services are delivered per an agreed-upon contract. During a second-party audit, customers assess whether the supplier adheres to the standards and procedures that meet customer-defined needs. These audits are more formal than first-party audits because the audit findings could influence the customer's purchasing decisions.
A regulatory audit or third-party audit is performed by an audit company that is independent of the customer-supplier relationship and free of conflict of interest. In a third-party audit, the auditor is neutral. Organizations use third-party audits to secure certification, registration, recognition, an award, or license approval. However, if non-adherence to the standards and procedures is discovered, the organization may be cited, fined, or penalized.
Audits are crucial for all businesses and are especially important for businesses that are in regulated sectors. A financial audit is a minimum requirement for every business, but you may need to prepare for multiple audits. For example, if you are in the life sciences sector, prepare for ISO, US FDA, EMA, MHRA, and other regulatory audits. Additionally, your business may need to schedule internal audits.
Audit preparation: Planning the date and time for the audit and inviting the lead auditor and auditees.
Audit execution: Onsite verification of a process, product, or system through physical inspection or document review.
Audit reporting: Communicating the audit findings in a report and highlighting organizational issues and follow-up actions.
Audit follow-up and closure: The process ends when no observations are reported by the lead auditor or after follow-up actions are completed.
Successful implementation of these stages requires efficient scheduling, role assignment, document control, and execution. An audit management system (AMS) can help you manage these activities.
