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 to 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 areas.
Understanding the horizontal audits or the processes of organizations are very vital for the auditor to conduct their operational audit and it also assists operational staff to do smoothly for their work.
As the short illustration meaning, the horizontal audit is defined as an examination of the audit activities, processes, and evaluation in the same activities across functions/departments or organizations.
Normally, there are two types of audit methodologies that are commonly used in examination or auditing function or department as Horizontal audits and Vertical audits.
For Vertical audit, it differs from the horizontal audit which is deeply conducting the examination on the specified audit area in function or department.
Moreover, horizontal audits could be illustrated as the audit approach to produce for detection and checking on whether the audit activities, processes, and the evaluation are correct and ensure the existing workflow continues with effectively implemented.
From the practical perspective, here is the example of horizontal audits on the examination of the process workflow of purchasing IT/office equipment.
To be more simplified about the horizontal audits, here is an example of the purchasing IT or office equipment.
The Purchase Request (PR) document is made by Sale or requester team with the appropriate approval; it is identified the status of approval then documents required to submit to budgeting and finance team to verify before there are other further steps that relevant to 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 is a suitable assessment tool for the auditor to conduct the work through and examine the documents flow in cross-functional departments and to identify the risks or weakness of control.