What is a Horizontal Audit? (Explained)

The horizontal audit is the performance of audit procedures or activities, processes, and evaluations to exactly the same to examine across the different functions or departments.

The purpose of performing a horizontal audit is to examine and observe whether there is the same standard of control for the different departments.  It is also called “Peer Audit.” This is very important for the auditor to understand the horizontal audit that its audit processes could be shown the flow of information or figures or essential documents across from one area to another area.

Understanding the horizontal audits or the processes of organizations is vital for the auditor to conduct their operational audit. It also assists operational staff to do smoothly for their work. As the short illustration meaning, the 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 function or department as Horizontal audits and Vertical audits. Vertical audit differs from horizontal audit, which is profoundly examining 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 evaluation 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.

To simplify the horizontal audits, here is an example of purchasing IT or office equipment. 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 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.

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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.