What is a Special Audit? Scope and Why is it required?


A Special Audit can be defined as a tightly defined type of audit that is conducted in order to probe into a specific area of the organization’s activities.

As a matter of fact, it can be seen that this type of audit is mainly initiated by a third party, like a government agency or the tax authority.

However, it can also be authorized by any other relevant entity, including any internal authorities that might be in a position to do so.

Examples of special audits include Compensation audits, control audits, cost audits, fraud audits, and royalty audits.

The Need for A Special Audit

Special Audits are mostly needed when some abnormal behavior is suspected within the organization.

Mostly, they are called for when it is suspected that the laws and regulations have been overlooked pertaining to finances, or financial management within the organization. However, they are not only restricted to cases pertaining to fraud.

They can also be conducted when there are other institutional violations that might include pertaining to duties, authorizations, internal control procedures, or responsibilities of the Senior Management.

In the same manner, Special Audits can also be related to corporate reorganization or bankruptcy.

Scope of Special Audit

As mentioned earlier on, it can be seen that a special audit is conducted out of routine, with a specific or a special purpose.

However, these special purposes are quite varied in their nature, and the overall outcomes based on those special audits.

  • Compliance Audit – This is mainly conducted when there is a need to examine the policies and procedures to check if they follow internal or regulatory standards.
  • Construction Audit – This analyzes the costs that occur for a given construction project. In the same manner, this also tracks down the actual amount that is paid to contractors, suppliers, and another reimbursement that takes place in this regard.
  • Information Systems Audit. An information System Audit is mainly conducted when there is a need to review the overall controls present in software development. Additionally, it also involves a review of controls regarding software development, data processing, and overall access to computer systems.
  • Investigative Audit. Investigative Audits take place when there is a need to find details of a specific event or an incident within the company, that was suspicious.
  • Tax Audit. This Audit is mainly initiated to analyze the overall tax returns that are submitted by an individual or business entity. The main rationale is to see if the paid tax is actually valid.
Related article  Financial Statements Auditing - Definition, Purpose, And Phases

What Should Be Included in Special Audit Report?

Here is a list of components that should be included in a special audit report:

Executive Summary

The Executive Summary should provide a brief overview of the purpose of the audit, its scope, findings, and conclusions. It should be written in a clear and concise manner and should highlight the key points of the report.


The Background section should provide information about the organization being audited, the reason for conducting the special audit, and any relevant background information.


The Objectives section should outline the specific goals and objectives of the audit. It should describe what the audit aims to achieve and what questions it seeks to answer.


The Scope section should describe the extent of the audit and what areas were covered. It should also explain any limitations of the audit and what was excluded from its scope.


The Methodology section should describe the approach and methodology used in the audit. It should explain how data was collected, analyzed, and reviewed and provide details on the audit procedures used.


The Findings section should present the results of the audit, including any issues or discrepancies discovered during the audit process. This section should also provide recommendations for addressing any issues that were identified.


The Conclusions section should summarize the findings of the audit and provide an overall assessment of the organization’s performance in the areas covered by the audit.


The Recommendations section should provide suggestions for improvements and future actions to address any issues identified during the audit.

Related article  Operational audit: Definition, Types, Processes, Purpose, and Reporting


The Appendices section should include any supporting documentation or information that was used during the audit process. This may include charts, graphs, or tables.

These are the main components that should be included in a special audit report. The report should be well-organized, clearly written, and easy to understand. The findings and recommendations should be supported by evidence, and the report should be fair, objective, and impartial.


Therefore, it can be seen that Special Audits are mainly conducted in order to investigate a special cause or to justify something that is not normal within the organization.

The main reasoning behind such an audit is to ensure that the overall functioning within the organization is normal, and there are no productivity losses involved.

This greatly helps them to be able to identify relevant areas of improvement, where they are able to trace weak links and ensure that they are corrected for optimal performance within the organization.