Conducting Effective Audit Walkthroughs

What is an Audit Walkthrough?

An audit walkthrough is a process designed to ascertain how a facility, business process, system, and transaction work. It involves comprehensive process mapping, stakeholder interviews, and observational testing to identify risks, verify compliance, assess operational efficiency, and support financial reporting.

Although this diagnostic tool is often associated with manufacturing, other sectors also employ this procedure to understand internal controls and identify potential risks, such as finance, IT, and healthcare.

Importance and Benefits

Audit procedures aim to detect errors or fraud by reviewing financial statements and operational ledgers or conducting formal interviews with relevant personnel. Conducting an internal audit walkthrough is an extra step that provides a firsthand understanding of the process and controls, helping companies gain the following:

• Better evaluation of operations and internal controls – Written procedures often differ from actual execution. Physical inspections pinpoint mistakes in the process or weaknesses in the controls and address them immediately.

• Improved risk mitigation – Uncovering potential risks and gaps in the safeguards helps the company prevent errors or fraudulent activities in the future.

• Enhanced audit quality and efficiency – Audits can be concentrated on problem areas, avoiding unnecessary work. This also facilitates smoother future external audits and regulatory checks.

• Ensured compliance with standards – Walkthroughs verify the company’s adherence to internal policies and external requirements, helping them avoid legal penalties and reputational damage.

• Fueled business growth and innovation – Insights reveal inefficiencies and room for improvement, ultimately helping the company perform better, adapt to changes, and progress in the future.

Common Types of Audits That Require a Walkthrough

Walkthroughs bridge the gap between what’s documented and what happens on the floor or off-site. While some can be done remotely, the following necessitates the auditor’s physical presence:

Safety Audits

Since this is a review of the company’s safety policies, procedures, and practices, inspectors should observe actual workplace conditions, employee behaviors, and the implementation of safety measures.

Quality Audits

This is a systematic examination of the organization’s quality management system, ensuring it complies with standards and processes. Auditors need to witness those in action to verify that Quality Assurance and Control (QA & QC) guidelines are implemented.

Process Audits

Because this is a detailed evaluation of the operations, there’s a need to verify if processes are working as intended. The inspector’s presence helps validate integrity and identify opportunities for process improvement.

System Audits

Since this is a comprehensive assessment of the company’s overall management system, the presence of the auditor is crucial. Aside from physical checks, inspectors can test controls in real time and conduct interviews with frontline workers.

Compliance Audits

As the term implies, this focuses on whether the organization follows local laws, regulations, and international policies. Walkthroughs trace how rules are applied on the floor and identify risks often overlooked in paperwork.

Roles and Responsibilities

Audit walkthroughs are a collaborative effort, involving different personnel working together to get an accurate picture of the operations. The following individuals should understand their part in this crucial activity:

• The lead auditor guides the audit team, from planning and coordination to interpreting the findings for the top management.

• Audit team members bring expertise to the table. They gather evidence, conduct interviews, test controls, and conduct audit walkthrough documentation.

• The process manager is accountable for process performance and implementation of controls. They clarify procedures, explain risks, and address identified gaps.

• The QA personnel share quality data and explain principles, helping identify risks or deviations. They also implement recommended corrective actions.

• Operations staff, as executors of daily tasks, should explain practical challenges so they can be addressed. They should also verify training and competence.

Considerations for Manufacturing-Specific Audit Walkthroughs

Walkthroughs are crucial in manufacturing audits because they offer firsthand insight into how processes and controls are implemented on the shop floor, beyond what’s written in documents. Consider the following while conducting audit walkthrough procedures:

• Production line controls should function as designed, preventing errors or defects during production.

• Equipment calibration and maintenance ensure that machinery operates accurately and reliably, preventing quality issues and potential downtimes.

• Material handling and storage must be checked to avoid contamination, spoilage, or mix-ups, which aren’t always evident from records.

• Batch and lot traceability require physical verification to track product history and recall readiness.

• Quality control checkpoints should be carefully inspected to ensure controls at key stages meet standards.

• Operator training and competence are best observed and evaluated during walkthroughs, as actual skills may not always be fully reflected in training records.

• Environmental and safety compliance risks and violations can be immediately flagged during physical inspections.

How to Perform an Audit Walkthrough

It’s essential to approach every step of the walkthrough methodically and with full attention to detail, as each phase helps auditors verify whether internal controls are working. Here are some practical steps to follow:

Audit Walkthrough Steps and Best Practices

Prepare and plan.

The first step lays the groundwork for a focused, efficient walkthrough. If conducted haphazardly due to a lack of focus, key risks and controls may be overlooked. Take note of the following best practices:

• Clarify objectives early so everyone involved understands the “why” of the activity.

• Develop a comprehensive checklist to cover all critical areas, but tailor it to ensure specificity.

• Engage cross-functional teams to gain a holistic understanding of the process and interdependencies.

Review existing documentation.

Auditors should understand how processes are supposed to work before comparing them to actual practices. This baseline helps in designing controls.

• Thoroughly read process narratives, flowcharts, and policies to grasp the intended flow and controls.

• Formulate targeted questions based on ambiguities or potential weaknesses to ask during the walkthrough.

Observe and interview on-site.

This step reveals the practical execution of processes, offering valuable insights not found in documentation. Conversations with frontline staff are essential for understanding the rationale behind their actions.

• Explain the auditing team’s presence and the walkthrough’s purpose to involved personnel.

• Observe when processes are typically running to gain a realistic view of the execution.

• Ask open-ended questions to acquire detailed, unscripted responses.

Test controls and verify compliance.

Essential for assessing risk and regulatory compliance, this phase confirms if controls are present and working effectively.

• Meticulously record all test steps, findings, and supporting evidence to substantiate conclusions and compliance.

• Utilize technology and specialized tools to enhance the efficiency and precision of control testing procedures.

Report and follow-up.

Audit observations should be translated into actionable improvements, which will be shared across the organization. The final step ensures findings are addressed and weaknesses are resolved.

• Focus efforts on high-impact risks and weaknesses to maximize risk mitigation.

• Systematically track corrective actions to ensure deficiencies are effectively remediated.