What is a special audit?

A special audit is a type of audit that is conducted to look at a specific set of activities within an organization. It can be initiated internally or externally. For example, a government agency may require any entity to conduct a special audit to investigate any specific client or a specific area.

Third parties mostly initiate the special audit. Like investigating the accuracy of income heads, a tax authority may require a company to conduct a special audit. This audit is conducted to enhance the confidence over figures and processes in place for the effective and efficient preparation of financial reports.

This type of audit is different from an external audit.

Examples of Special Audit

Here are some of the common types of special audit:

● Royalty audits

● Tax audits

● Control audits

● Cost audits

● Compensation audits

● Compliance audits

● Fraud audits

● Constructions audits

● Information’sInformation’s systems audits

Why special audit is conducted

The main intention behind this audit is to prove that if any abnormal behavior suspected within the organization actually exists or not. In most circumstances, a special audit investigation is initiated when there is the probability of violations of laws and regulations related to finances or other matters within an organization. This audit doesn’t need to be only conducted when there are any fraud litigations against a company.

It can also be initiated when a special case arises that needs to be addressed via conducting actual research on that problem. E.g., if there are any institutional breaches of law pertaining to responsibilities, internal controls, duties, authorizations, etc., the special audit is conducted to investigate such matters. Similarly, a special audit can also be conducted in case of bankruptcy of organizations.

Scope of special audit

Usually, the special audit is conducted to fulfill a specific purpose or reach a goal to confirm certain things. It totally depends on the type of special audit service to understand what audit procedures are relevant for a given assignment.

Every type of such audit has its own purpose. Let’s talk about types of special audit in detail.

Tax Audit

The purpose and intention behind initiating a tax audit are to evaluate the figures of overall tax returns that individuals and business organizations have submitted as a part of their legal obligation. The special audit procedures are performed to collect evidence that either the values submitted in tax returns are accurate figures (supported by relevant documentation) or it depicts a true representation of company affairs.

Investigate Audits

This type of audit is initiated to investigate the details of any specific event. It’sIt’s when details of any special events have to be investigated. For example, the management or any third party can ask to conduct investigative audits for any specific event inside an organization. A government agency may ask an entity to conduct this type of special audit for any suspicious event that has raised major concerns.

Compliance audit

It is a special audit in which policies and procedures are examined to ensure that the organizations are following the internal and regulatory standards.

Fraud Audit

It is a special type of investigation to determine whether any fraudulent activity exists in any specific area of financial statements. Frauds can be committed in various ways, such as altering accounting records, misusing assets, and fictitious journal entries to engage in fraudulent activity. So, if the entity gets knowledge that management or officers are engaged in fraud, a special audit to investigate fraud can be initiated. A Fraud audit involves checking any special area of accounts expected to be affected. For example, if a cashier runs away by taking cash, then a fraud audit will be initiated to check:

● what amount was stolen by theft

● a detailed analysis of cash records received by the cashier

● Proper investigations of the tasks previously performed by the cashier etc.

Information system audit

An information system audit is necessary to verify that the information systems are working appropriately and there are no errors or malfunctioning in the system. This special audit is useful for assessing whether overall controls related to software developments are operating effectively or not. An information system audit is also conducted to review various controls such as processing of data, software development, access to information systems, etc.

Construction Audit

As the name implies, a construction audit is conducted to analyze the costs for any given construction project. It involves tracking different construction costs like payments made to suppliers, contractors, etc. The costs as per records are verified against the actual documents to ascertain the credibility of construction expenses.


A special audit is performed to assess specific business activities. It’sIt’s about assessing if something is wrong with an account balance or activities. Any affiliated authority can initiate this type of audit to assess if their rights are protected.

An excellent resource for external audit is at BDO site

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