The horizontal audit is the performance of audit procedures or activities, processes, and evaluations to examine the different functions or departments. The purpose of performing a horizontal audit is to examine and observe whether the different departments have the same control standard.
It is also called “Peer Audit.” It is very important for the auditor to understand the horizontal audit that its audit processes could show the flow of information, figures, or essential documents from one area to another.
Understanding the horizontal audits or the processes of organizations is vital for the auditor to conduct their operational audit. It also assists operational staff in doing smoothly for their work.
As a short illustration, a horizontal audit is defined as examining the audit activities, processes, and evaluation in the same activities across functions/departments or organizations.
Typically, two types of audit methodologies are commonly used in examination or auditing functions or departments: horizontal and Vertical audits.
Vertical audit differs from horizontal audit, which profoundly examines the specified audit area in function or department.
Moreover, horizontal audits could be illustrated as the audit approach to detect and check whether the audit activities, processes, and evaluations are correct and ensure the existing workflow is effectively implemented.
From the practical perspective, here is the example of horizontal audits examining the process workflow of purchasing IT/office equipment.
Here is an example of purchasing IT or office equipment to simplify horizontal audits. The Purchase Request (PR) document is made by the Sale or requester team with the appropriate approval.
It is identified the status of approval then documents are required to submit to the budgeting and finance team to verify before other further steps are relevant to the procurement team to create Purchase Oder (PO) documents.
After that, all documentation is submitted for authorization. All documents are completed and sufficient filing for the accounting team and designated location after the flow of documents is completed and satisfied to pay out by the accounting team.
Horizontal audits are a suitable assessment tool for the auditor to conduct the work through and examine the documents flow in cross-functional departments and identify the risks or weaknesses of control.