Audit Findings: Everything You Need to Know

by Maya G

It is a no-brainer that the results of an audit are called audit findings. Audits are routinely carried out in organizations to ensure that they follow the best practices in the industry, comply with legal and regulatory requirements, and align with other organizational policies. Once the auditor is done with the auditing, they must present the audit findings to communicate what has been discovered and their recommendations for improvement.

Audit Findings: Everything You Need to Know

How Do You Classify Audit Findings?

During audits, auditors not only look for compliance with regulations but also for non-conformance against requirements. This means that several findings can come to light, and they can be given different classifications. Several classifications need not be a cause of worry because, with each audit, at least one issue is bound to be caught. Essentially, there are three classifications or gradings for findings.

(i) Major Non-Conformance 

It is considered a significant non-conformance when the non-conformance influences the ability of an organization's management system to achieve the desired results. An instance of nonconformity can be classified as substantial in the following scenarios:

  • Several minor nonconformities associated with the exact requirement or issue could be classified as significant non-conformance. This is because it shows a systemic failure in the organization.
  • If there is a doubt that effective process control is in place or that the organization's products or goods will meet the required guidelines, it is treated as a major non-conformance.
  • A finding against an item of legislation, typically within ISO regulations.

(ii)Minor Non-Conformance

When an instance of nonconformity does not affect the capability of an organization's management system to achieve the intended results, it is called a minor nonconformity. In most cases, this does not directly affect a company's products or services.

(iii) Observations

However, these observations are suggestions that can help the management system or prevent a potential non-conformance

Since auditors have experience reviewing various organizations in the same field that achieve the same results with different methods, their inputs are valuable suggestions. They can also be warnings for damages or nonconformity in the future.

What Are the Four General Types of Audit Findings?

Audit findings are an insight into an organization's performance, financial scenario, and so on from a professional auditor. Based on the company's compliance with the regulatory requirements and the accuracy of the data submitted, the findings of an audit can be classified into four. 

Types of Audit Findings

1. Clean Report or Unqualified Opinion

When the audit shows no violations against compliance or discrepancies in the organization's documents, the findings are clean. It is also called an unqualified opinion because the professionals conclude that the company does not need to adjust or correct anything to improve.

2. Qualified Report or Qualified Opinion

In this type of audit finding, there are a few violations of compliance guidelines, and the auditors draft a report mentioning them. The results also include the auditor's professional opinion on improving the company's operations. Thus, it is also called a qualified opinion.

3. Disclaimer Report or Disclaimer of Opinion

Throughout the auditing process, an organization is supposed to give unrestricted access to its data to the auditors. When the auditors feel that the company has been withholding information, a disclaimer report is issued.

4. Adverse Audit Report or Adverse Opinion

When a company is entirely nonconforming with the compliance guidelines and other regulations, auditors discover significant misstatements and irregularities. In such cases, an adverse audit report is issued. It contains detailed information on where the organization is lacking and the thoughts of the auditor on how the organization can improve.

How Do You Make Audit Findings?

The aim of curating audit findings is to convey a clear message to the audited organization. As the first step of writing an audit report, the auditor should ensure that the contributors understand the desired outcome of the information. If an audit report impacts the business, it must motivate leadership to act upon the audit's recommendations.

  • Keep your audience in mind because it is essential to understand your organization's culture. Whether the team is cross-functional, collaborative, or compliance-oriented, your report needs to get through to them.
  • The findings should be stated concisely and precisely. Any type of fluff in the matter is unnecessary.
  • The audit report should be written so that every individual can easily understand the terminology and sophistication level of the writing. Every point in the findings should be understandable for people of all levels of expertise and experience.
  • The findings should be framed so that it brings the reader's attention to the information as concisely as possible. Make sure to format it right to highlight the key points.

What Are the Two Actions Taken on the Audit Findings?

Once the audit findings are reported, an organization's outlook on the situation influences its decisions. The suit report can be used to nurture the organization and mend the gaps in management, or the organization can stay put.

Two Actions Taken on the Audit Findings

1. Agreement and Implementation of Corrective Actions

If the organization agrees with the findings in the audit report, the next step is implementing corrective measures. The company can identify the root causes of nonconformity, allocate the resources to correct the irregularities, and appoint a team to oversee this transformation. The corrective action plan should specify how the changes will prevent reoccurrence in the future and what remedial controls will be implemented in the meantime.

2. Disagreement

If the organization disagrees with the conclusions made by the auditors, it can dispute it or offer the defense that no issues have been noted in previous audits. Here, the organization needs to proceed cautiously because you are essentially calling out the auditors by disagreeing. There have been instances where the disagreements were valid and substantiated, but lacking evidence to support your conflict can be a sticky situation.

How Do You Respond to Audit Findings?

An organization can adopt many ways to respond to audit findings. They can choose not to respond, react positively to the results, make amendments immediately, or disagree with the conclusions. The key is to make the response clear and concise in a formal manner.