What is a vertical audit?

An audit is a detailed examination of an organization, its finances, or a specific process.

A vertical audit usually looks at an entire department within an organization. This contrasts with a horizontal audit that looks at a process.

An audit is a term covering an evaluation of a particular subject. It is usually made up of a series of objective individual checks. Some audits are conducted for legal reasons, while others are voluntarily carried out by an organization to find ways it could fix problems and improve performance.

Audits can fall into two main categories: horizontal and vertical. A horizontal audit looks at an entire process and isn't constrained by the organizational structure of the business or group concerned. For example, a horizontal audit at a widget factory might track the process of the company ordering raw materials, the raw materials entering the factory, the workers using machinery to turn the raw materials into widgets, distribution staff packing the widgets, and delivery trucks taking the widgets to wholesalers or clients. In its narrowest definition, a horizontal audit would follow one specific batch of widgets through this process, looking for potential problems or room for improvement.

A vertical audit does not stretch across the entire organization and process, but concentrates on one particular aspect, for example the widget packing department.

The contrast with a horizontal audit could simply be a matter of quantity, for example checking all the widget packing for an entire week.

A stricter and more literal form of vertical audit would mean extending the checking "up and down" the entire department regardless of hierarchy. For example, auditors might interview all staff in the department about the work and check for problems that might arise from the way work is divided up and assigned, or the way managers supervise junior staff.

A vertical audit is more likely to uncover problems or issues within a specific department. Although it doesn't necessarily use less resources to carry out, a vertical audit is more targeted and likely to be more efficient.

The limitation is that a vertical audit only works if you've already identified the department that has the problem or could use improvement. A horizontal audit is better if you know there's a problem (such as customer complaining about getting broken widgets) but don't know where in the production and supply chain the problem lies.