An audit is an independent review and verification of an organization’s assertion or claim. The assertion may be that a company follows applicable standards or rules when performing its operations, that financial statements are presented fairly, that service commitments are being met, etc.
If you recently learned that your organization needs an audit, you are probably experiencing a little bit of anxiety. For many business leaders, the word “audit” invokes visions of a grueling test or an investigator digging through their files to find every little mistake or error. While most audits do include tests of controls and reviewing of documentation, there is no need to fear them.
In this guide, we’ll break down what actually occurs during an assessment, dispel common misconceptions we see in the field, compare the primary audit categories, and share practical insights from the auditor’s seat.
What Is the Purpose of an Audit?
The main goal of an audit is to provide independent assurance that the organization is doing what it says it is doing. An audit is not meant to be a trap or an adversarial inspection. It is simply an objective evaluation of activities performed within an organization. Most audits are used to assess whether an organization’s financial statements and disclosures, internal controls, or security safeguards meet established frameworks, such as GAAP, SOC 1, SOC 2, HIPAA, HITRUST, or ISO 27001.
The results of an audit give leadership reliable information about their organization’s control environment and can be shared with business partners, clients, prospects, vendors, and other stakeholders to build trust. Identifying weaknesses or errors through an audit also provides the organization an opportunity to correct them before they are exploited by bad actors inside or outside of the organization.
The following are a few common misunderstandings about audits.
Expecting a 100% Inspection
Auditors do not inspect every single transaction, system log, or document. They rely on risk-based sampling to select items for testing to draw conclusions. Testing everything would require auditors to duplicate all of the activities performed by the organization, which would be extremely costly and time-consuming for the auditor and the organization being audited.
Providing 100% Assurance
Since auditors cannot test everything, it follows that they cannot guarantee or provide 100% assurance that all issues are found during an audit. Most professional standards require auditors to provide reasonable assurance that their conclusions are correct. That being said, it never ceases to amaze me how frequently our sampling will include the “one time” a policy or procedure was not followed.
Viewing the Auditor as the Enemy
Some people assume that auditors’ greatest joy comes from finding exceptions and penalizing them. Let me assure you that is not the case. In reality, auditors are neutral evaluators whose objective is to provide an accurate, unbiased look at your control environment. I have some clients who actually look forward to our audits because they are prepared and know the result will be positive.
Audits Are Pass or Fail Tests
I have some clients that really stress over each and every exception noted in their audit results. It’s good to want to have everything running perfectly, but it is important to realize that while the ultimate result for some audits is binary, a single or partial control failure does not necessarily mean that the organization will fail the overall assessment. For example, an ISO 27001 examination ultimately results in the organization receiving a certification or not. However, a certificate does not mean the organization perfectly met all of the requirements. Most standards do not require perfection and allow for a limited amount of variance while still meeting their requirements. We’ll discuss some of the different opinions you may receive later.
Having a Documented Policy Is Evidence of a Control Operating
This is a common misconception. A policy is evidence of the design or how a control is to be performed, but it is not evidence of the control being performed. To test the operational effectiveness of a control, an auditor must inspect evidence proving that the control was actually executed as described in the policy. This is a common challenge for organizations going through an audit for the first time. Often organizations acquire a GRC tool and customize templates (provided by the tool) for all the policies and procedures required for a certain standard. This approach is fine and can work when done correctly. Unfortunately, I have assessed organizations with policies and procedures that did not actually reflect their actual processes because they were not documented correctly or they were not communicated to personnel within the organization.
What Are the Different Types of Audits?
An organization may require many types of evaluations, from basic internal audits to third-party security attestations. The following table lists common types of audits and a brief description of their objectives. You may use the links to learn more detailed information about each type of audit.
| Audit Type | Core Objective |
|---|---|
| SOC 1 | Evaluates internal controls relevant to user entities’ financial reporting. |
| SOC 2 | Evaluates controls related to security, availability, confidentiality, processing integrity, or privacy. |
| HIPAA | Assesses safeguards protecting protected health information (PHI). |
| ISO 27001 | Evaluates an organization’s Information Security Management System (ISMS). |
| Internal Audit | Reviews internal risk management, governance, and operational efficiency. |
| Compliance Audit | Checks adherence to specific regulatory laws or governmental mandates. |
| IT Audit | Evaluates infrastructure security, access controls, and technical safeguards. |
Please note that this listing is not a comprehensive list of audit types, and some additional audit types (i.e., financial statement audits) were omitted as Linford & Company does not perform them.
Who Performs an Audit? 1st, 2nd, & 3rd Party Explained
Audits can also be grouped by who performs the examination. The following briefly describes each of the three types of audits.
First-Party Audits (Internal Audits)
First-party audits are conducted internally by your own personnel or an outsourced internal auditor. These are self-assessments that can cover any scope assigned by the organization’s management. The results are reported to management and are not shared outside of the organization.
Second-Party Audits (Vendor / Customer Audits)
Second-party audits are performed directly by a customer or business partner on a supplier or service provider. These check whether a vendor is upholding contractual security obligations or specific quality standards. Similarly, service providers may perform royalty or licensing audits to assess whether customers are paying the correct amount for their use. The results of these audits are shared between the two contracted entities.
Third-Party Audits (Independent Attestations)
Carried out by an independent, accredited CPA firm with no commercial ties to your business. These audits are performed against specific standards or frameworks (e.g., SOC 1, SOC 2, HIPAA, and ISO 27001). The results are documented in a formal report or certificate that is delivered to the management of the organization, which can share it with current and prospective clients to demonstrate compliance.
The Five Phases of the Audit Life Cycle
No matter the type of audit, your engagement should follow the five steps outlined below.
- Planning & Scoping: Defining system boundaries, agreeing on applicable criteria, and mapping system components.
- Information Gathering: Collecting policies, organizational charts, architecture diagrams, and risk assessments.
- Fieldwork & Evidence Testing: Reviewing sample populations, like access tickets, change management logs, and system configurations, and interviewing key personnel.
- Findings & Review: Evaluating any exceptions found during sampling and discussing the context with management to confirm facts.
- Reporting & Considerations: Delivering the final report, detailing test procedures, and providing constructive considerations for continuous improvement.
Two Helpful Frameworks: The Three Cs and Three Ps
If you want a quick mental model for how auditors evaluate a system, these two classic concepts sum it up well.
The Three Cs of Audit Findings
- Criteria: The baseline standard or benchmark being evaluated against (i.e., SOC 2 Criteria).
- Condition: The actual state of the control as observed during testing.
- Cause: The underlying reason why a gap exists between the Criteria and the Condition.
The Three Ps of Control Environments
- People: The team members executing daily operations and security practices.
- Policies: The written rules establishing management’s expectations.
- Processes: The repeatable workflows and technical steps that put those policies into action.
Frequently Asked Audit Questions
These are the questions we hear most often from clients getting ready for their first audit.
Is An Audit a Good or a Bad Thing?
An audit is overwhelmingly positive. While preparing takes time and focus, a completed audit report serves as valuable proof of operational maturity. It builds trust with enterprise buyers, speeds up sales cycles, and verifies that your team is taking security seriously.
How Long Does an Audit Usually Take?
This question has multiple layers. You could be asking:
- How many days or weeks does the organization need to block out to work on the audit?
- How much time will be required for fieldwork when personnel meet with the audit team to answer questions and/or show evidence?
- How long will it take from the first request for the audit to get the report or certificate in hand?
Unfortunately, the answer to these questions is “it depends.” The length of time it takes to perform an audit depends primarily on the type of audit and the scope that is covered by the audit. Typically, the fieldwork for SOC 1, SOC 2, or HIPAA assessments can be performed over a single week, and the draft report is available three weeks after fieldwork is completed. However, the required time would increase if there are multiple applications being covered or if the organization takes a long time to provide the requested evidence. Initial ISO assessments have two stages, which may require a week of fieldwork each, but the surveillance audits in subsequent years may only require a few days of fieldwork.
How Do You Prepare for an Audit?
Good preparation starts well before fieldwork begins:
- Work with your audit team to lock down a clear scope early.
- Assign specific control owners across your team so everyone knows what they’re responsible for.
- Automate evidence collection where possible to avoid manual gathering.
- Run through an internal readiness review to spot missing documentation early.
What Are Some Common Red Flags Auditors Notice?
During testing, experienced assessors pick up on subtle signs that controls might be slipping in practice.
- Delayed Responses: Are evidence requests fulfilled promptly, or does it take days or weeks to find the evidence? Typically, the longer it takes, the more skeptical an auditor will be, as it raises more questions of why it is taking so long.
- “Just-in-time” evidence: Screenshots, ticket approvals, or policy sign-offs that are all timestamped right before audit fieldwork started.
- Chat-app change approvals: System changes or access elevations pushed through informal chat channels without a documented ticket or peer review. The use of Chat-app for documenting controls is not necessarily unacceptable. However, it may be difficult to find evidence when looking back over a year, and if it is not a formal process, there is a higher likelihood that they will not be documented consistently.
- Missing recurring records: Having a policy that mandates quarterly user access reviews, but lacking records or logs proving those checks happened on time.
What Type of Audit Opinion Did I Receive?
When an assessment wraps up, the auditor issues a formal report containing an opinion. In compliance and financial audits, this opinion tells stakeholders how much weight they can place on management’s assertions:
- Unmodified (Clean) Opinion: This is your desired result. It means the auditor obtained reasonable assurance that controls were fairly presented and operating effectively throughout the audit period.
- Qualified Opinion: Issued when the auditor encounters a specific, isolated exception or control failure, but the rest of the control environment remains reliable.
- Adverse Opinion: Issued when control failures are severe and pervasive, meaning the system or financial report cannot be relied upon.
- Disclaimer of Opinion: Happens when the auditor is unable to collect enough evidence to reach a conclusion, usually because records were missing or access was restricted.
Approaching Your Audit with Confidence
An audit isn’t meant to be a hostile inspection; it’s an opportunity to validate your controls, build trust with stakeholders, and protect your business. By understanding how the process works, addressing common red flags early, and staying organized, you can navigate any assessment smoothly.
If your organization is preparing for a SOC 1 audit, SOC 2 audit, HIPAA audit, or ISO 27001 assessment, having an experienced team in your corner makes all the difference. Contact us at Linford & Company to learn more about our audit services and how we can help simplify your compliance journey. You can also reach out to me directly if you’d like personalized guidance with your upcoming SOC assessment!
