Setting audit criteria and objectives

Understanding the Foundation of a Successful Audit

Setting audit criteria and objectives is the first important step in the audit planning and preparation process. These help guide the internal audit team on what to check and why. Without clear criteria and objectives, an audit can become confusing and less useful.

Audit criteria are the rules, policies, procedures, laws, or standards that the audited area should follow. They act as a benchmark or yardstick to measure if the activities are done correctly and efficiently. For example, audit criteria might include company policies on cash handling or government regulations about safety.

Audit objectives explain what the audit aims to achieve. Objectives focus the audit on specific areas or issues and define the scope. They help auditors decide which processes to examine and what questions to ask. Good objectives make the audit purposeful and relevant.

A clear objective might be “to check if all purchase approvals follow the company’s policy” or “to verify that employee attendance records are accurate and complete.”

Why Setting Audit Criteria and Objectives Matters

• Provides clear targets for the audit work
• Helps auditors focus on important risks or problems
• Ensures the audit results can be compared with established standards
• Supports consistent and fair assessments
• Guides the audit team in gathering the right evidence

Setting these carefully also benefits the auditee (the department or person being audited). When they understand the criteria and objectives, they know what is expected and what will be checked. This can reduce misunderstandings and improve cooperation during the audit.

To set audit criteria and objectives well, auditors usually:

1. Study relevant documents such as policies, laws, and previous audit reports.
2. Discuss key risks and concerns with management and stakeholders.
3. Define what successful performance looks like to create measurable objectives.
4. Keep criteria and objectives clear and simple, avoiding unnecessary complexity.

Good audit planning depends on this foundation. It shapes the audit program, helps manage time effectively, and makes the final audit report focused and actionable. Always remember, without clear audit criteria and objectives, your audit will lack direction and value.