Special audit definition

What is a Special Audit?

A special audit is a tightly-defined audit that only looks at a specific area of an organization's activities. This type of audit may be initiated by a government agency, but could be authorized by any entity, or even internally. Unlike a regular audit, which reviews overall financial statements, a special audit focuses on a particular area due to suspicion of fraud, regulatory requirements, or management concerns.

Characteristics of a Special Audit

The key characteristics of a special audit are as follows:

Targeted investigation . A special audit focuses on specific areas like fraud detection, compliance violations, or operational inefficiencies.
Triggered by special circumstances . A special audit is frequently conducted due to suspected fraud, legal disputes, financial irregularities, or regulatory requirements.
Can be internal or external . A special audit is performed by internal auditors (within the company) or external auditors (hired professionals, regulators, or government agencies).
Not routine . Unlike annual audits, special audits occur only when needed.
May involve legal or regulatory authorities . A special audit is often linked to government investigations, lawsuits, or corporate governance issues.
Findings are confidential . The results of a special audit may be shared only with top management, regulators, or legal teams rather than publicly disclosed.

Examples of Special Audits

Examples of special audits are noted below:

Compensation audit . This audit investigates whether authorized compensation levels are actually being paid to employees.
Compliance audit . This audit investigates whether an organization is adhering to the terms of a contract or certain rules and regulations.
Construction audit . This audit addresses whether the costs incurred on a construction project were authorized and paid for.
Controls audit . This audit investigates whether planned controls are actually being used, and how effective they are.
Cost audit . This audit reviews the costs being incurred, usually by a functional area, to see if they are reasonable.
Fraud audit . This audit is a detailed examination of the financial records of a business, with the intent of finding instances of fraud.
Information systems audit . This audit reviews IT systems to see if they are functioning as planned, and whether designed controls are functioning as intended.
Royalty audit . This audit addresses whether the correct royalties are being paid by the user of an asset to the royalty payee.
Tax audit . This audit is conducted by a government entity, to ascertain whether the correct tax amounts have been paid.