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.